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Technical Update - Brent and WTI Crude oil set for strong rebound
Kim Cramer Larsson
Technical Analyst, Saxo Bank
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!
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Today's Market Quick Take from the Saxo Strategy Team
Brent Crude oil formed a Hammer candle Monday bouncing from 200 weekly Moving Average. A short sweet rally could be seen to 0.618 retracement at 80.40 but an extended bounce to 0.786 retracement at 83.19 is not unlikely before Brent could resume downtrend.
However, medium-term Brent is in a down trend (weekly chart) supported by negative RSI. But RSI is showing divergence indicating an exhaustion of the downtrend.
If Brent drops back below Monday trough at 70.13 down trend resumes.
For Brent to reverse the down trend a close above 83.48 thus closing above the daily cloud is a minimum requirement. The upper falling trend line on the daily chart will act as a resistance. For the medium-term downtrend to be reversed a close above 86.75 is needed. First indication of that scenario to play out would be a break of the upper falling trendline.
Today's Market Quick Take from the Saxo Strategy Team
Brent Crude oil formed a Hammer candle Monday bouncing from 200 weekly Moving Average. A short sweet rally could be seen to 0.618 retracement at 80.40 but an extended bounce to 0.786 retracement at 83.19 is not unlikely before Brent could resume downtrend.
However, medium-term Brent is in a down trend (weekly chart) supported by negative RSI. But RSI is showing divergence indicating an exhaustion of the downtrend.
If Brent drops back below Monday trough at 70.13 down trend resumes.
For Brent to reverse the down trend a close above 83.48 thus closing above the daily cloud is a minimum requirement. The upper falling trend line on the daily chart will act as a resistance. For the medium-term downtrend to be reversed a close above 86.75 is needed. First indication of that scenario to play out would be a break of the upper falling trendline.
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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