Technical Analyst, Saxo Bank Group
Summary: Brent and WTI crude oil have formed bottom and reversal patterns and are set to rebound strongly. 7-10% short-term upside from current levels could be seen. Medium-term downtrend seems to be exhausting. Monday lows are key!
WTI Crude Oil bounced from the 200 weekly Moving Average and minor support and 0.382 retracement of the entire uptrend since WTI went to minus 40. Forming a Hammer candle Monday indicates a bottom and reversal. WTI seems set for a 0.618-0.786 retracement of the past few weeks of sell-off i.e., up to 74.50-77.34.
If WTI drops back below Monday low at 64.12 the medium-term downtrend is extended possibly down to 57.25. However, Weekly RSI is showing divergence thus indicating an exhaustion of the downtrend.
If WTI bounce continues higher to close above the medium-term falling trendline and above 80.95 the downtrend has reversed.
RSI divergence explained: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
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