WTI crude oil formed lower highs and found support at the $51.25 per barrel level, creating a descending triangle pattern on its daily time frame. Price is just bouncing off support and might be due for a move back to the top.
However, the 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside or that support is more likely to break than to hold. In that case, a drop of the same height as the chart pattern might be in order.
RSI is already treading higher to signal the presence of bullish momentum but is moving sideways to reflect consolidation. Stochastic is on the move north and has crossed the center line to signal a pickup in buying pressure that could take the commodity up to the triangle resistance at $60 per barrel.
Crude oil is on weaker footing as demand concerns remain in play. The lack of significant progress in US-China trade talks is dampening hopes that further tariffs could be avoided or that retaliatory measures on WTI crude oil could be lifted at some point.
Commerce Secretary Wilbur Ross said on Monday that an initial trade deal doesn’t need to be finalized next month. It doesn’t help that China is seeking $2.4 billion in retaliatory sanctions against the US for non-compliance with a WTO ruling in a tariffs case in the time of former President Obama. This could stoke tensions once more and might even convince leaders to take conciliatory options off the table.
Apart from that, the commodity might also take its cues from inventory data coming up later in the week. A large draw in stockpiles could signal that demand remains healthy but a pickup in inventory could mean that oversupply might stay a concern.