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The Oil Quotes Are Consolidating. A Technical Correction May Take Place


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Bulls have been prevailing on the black gold market for a long time already. The WTI crude oil futures have risen by more than 14% over the past month. Usually, there is a technical correction after such strong trend movements.

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Source: finviz.com


The latest report of the U.S. Energy Information Administration was mixed. Let's look at its details:

- Oil inventories: +2.237 million barrels. Experts expected the decline of the indicator by 2.876 million barrels;

- Gasoline inventories: -3.312 million barrels;

- Distillates stocks: -3.359 million barrels;

- Oil production: 9.620 million barrels per day (+67 thousand barrels per day);


The increase of production and oil inventories in the US put pressure the quotes greatly. Most likely this happened due to a significant drop of gasoline and distillates stocks in previous periods, while oil inventories rose only for the second time during the last 7 weeks. The total reduction of all energy resources fell by 9.1 million barrels per day.

The current technical pattern:

Support levels: 56.50 USD, 55.75 USD, 55.00 USD

Resistance levels: 57.50 USD, 59.00 USD

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The WTI crude oil futures are in the flat now. The technical picture is ambiguous. The key support and resistance levels are 56.50 and 57.50. The indicators dont show us any accurate signals. The price has crossed 50 MA and the MACD histogram is located near the 0 mark. I recommend opening positions from the key levels.


If the price fixes below the 56.50 support level, a corrective movement may emerge. The closest target for taking profits is the 55.75 mark. The price may reach the 55.00 mirror support level in the medium term.


An alternative option. I also dont exclude the further growth of the oil quotes. You can open long positions, if the price fixes above the 57.50 resistance level. The price can move to 58.50-59.00.


I also recommend using a trailing stop for both deals.



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About the author


Igor Afa is a financial analyst at JustForex.

 

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