WTI Crude Oil Retreats after a False Bullish Breakout

WTI Crude Oil Retreats after a False Bullish Breakout

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YesOption

The 4H WTI Crude Oil Chart shows a market that was in a sharp rally, which attempted to break above 1) falling trendlines from June’s highs, and 2) the 200-period simple moving average in the 4H chart. A couple of things will be needed in the 4H chart before we call back the bearish outlook.

WTI Crude Oil 4H Chart 7/22

WTI Crude Oil 7/22

(click to enlarge)

1) The 4H RSI needs to push below 40 to show that the bullish momentum is dead. Otherwise, if the RSI holds above 40, the bullish momentum remains, and another push toward 104.50 could be in the cards.

2) Also, price needs to clear and hold below 102, which would also clear and hold below the 50-period SMA in the 4H chart. This dynamic could be a strong bearish signal, but the absence of it does not mean the bearish outlook is invalid. It just means any bearish outlook is within a choppy market, and not a bearish trend in the short-term and therefore, should be limited, unless you can handle the volatility.

WTI Crude Oil Daily Chart 7/22
WTI Crude Oil Daily Chart 7/22

(click to enlarge)

Looking at the daily chart, you can see that price was rejected as it tested the previous resistance area between 104.50 and 105.22.

1) You can note that there was also a false break above the 50-day SMA, keeping the mode neutral.

2) The RSI has tagged below 30, and is now holding below 60, a dynamic that reflects maintenance or development of bearish momentum.

A break above 105.22 would therefore be a bullish continuation sign if the RSI also pushes above 60, and preferably above 70.

Bearish targets:
Otherwise, if the bullish attempt is over, downside risk remains back toward the 99.00 handle, with a more aggressive bearish outlook in the short-term toward the 97.00 pivot established in March.

Previous Post by Author: GBP/USD – Look for Buyers in the 1.70-1.7020 Area (7/22)

About Fan Yang

Fan Yang has been a forex trader since 2007. He attained his Chartered Market Technician (CMT) designation in 2010 and continues to trade and serve the Forex community by sharing his market outlooks.
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