WTI crude oil futures (October delivery) have been trading within a steep ascending channel in the 4-hour chart the past two weeks after being unable to dip below the two-month low of 64.40 reached on August 16. The market, however, could violate the bullish channel as the RSI is moving lower to exit the overbought area, while the MACD is slowing down below its red signal line, both flagging that some weakness could appear in the short-term.
A correction to the downside could meet today’s low of 68.63 and at the same time retest the lower bound of the channel. A failure to hold above this level, though, and more importantly, a deep fall below the 20-period (simple) moving average (SMA) currently at 68.43 could increase speculation that the recent rally has reached a peak and prices are poised to start a downtrend. If true, the next level to watch could be the August 22 high of 68.11, where the 23.6% Fibonacci of the upleg from 64.40 to 69.28 happens to be. Even lower, bears could try to cross the area between the 38.2% Fibonacci of 67.42 and the August 23 low of 67.30.
On the upside, immediate resistance could come at 69.11 where the market stopped today before eyes turn to the middle bound of the range, currently seen around 69.28. In case bullish actions strengthen even further, the focus could then shift to the upper line of the channel around 70.50, where any decisive close above this line could turn the bullish outlook even brighter.
