WTI crude oil is trending higher on its 1-hour chart as price formed higher lows and higher highs in a new ascending channel. Price is hitting resistance, though, so a correction might follow.
Applying the Fibonacci retracement tool on the latest swing low and high shows that the 38.2% level is close to the mid-channel area of interest where buyers might be waiting. A larger correction could reach the 61.8% Fib at $37.80 per barrel or the channel bottom. If any of these hold as support, crude oil could recover to the swing high at $39 per barrel or the top of the channel.
The 100 SMA is below the 200 SMA, though, so the path of least resistance is to the downside. In other words support levels are more likely to break than to hold. Then again, the gap between the indicators is narrowing to reflect weaker bearish momentum and a potential bullish crossover.
RSI is in the overbought zone to signal exhaustion among buyers, and turning lower could confirm a return in selling pressure. Stochastic is also indicating overbought conditions but has yet to move south before price could follow suit. A break past the channel top could set off a steeper climb for crude oil.
WTI crude oil is regaining its legs as the American Petroleum Institute reported a draw in crude oil inventories of 9.517 million barrels for the week ending September 11. Analysts had predicted an inventory draw of 1.271 million barrels while the previous reading printed a reduction of 2.970 million barrels.
This could be indicative of stronger demand conditions as businesses increase purchases in anticipation of stronger performance. It also allowed for profit-taking from earlier declines after Saudi Arabia downgraded its forecast for the Asian and global market.