WTI crude oil looks ready to resume its longer-term slide as price broke below a short-term rising channel. This signals that bearish momentum is returning and that the correction from the drop might be done.
Looking at the Fibs on the latest slide, however, suggests that there still might be some room for a higher correction. After all, price has yet to test the 38.2% Fib around $55.50 per barrel. A larger correction could go all the way up to the 61.8% Fib at the 200 SMA and former support near $65 per barrel.
The 100 SMA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse. In addition, the gap between the moving averages continues to widen, indicating increased selling momentum.
RSI is also turning lower without even hitting the overbought zone, suggesting that bears are eager to return. Stochastic is indicating overbought conditions as well or that buyers are exhausted and may be willing to let sellers take over. In that case, a slide back to the swing low may be in the works.
Optimism for the mid-level trade talks between the US and China was seen as the major driving force for commodity price gains last week. After all, further progress could revive demand for commodities as businesses revise their outlook.
But now that the talks are over, traders are hard-pressed to find any catalysts that could extend the rally. Supply remains elevated while demand forecasts are not so upbeat, putting downside pressure on energy prices. Still, the idea that the Fed could hold off more rate hikes until much later in the year could also be a plus for businesses and commodities.