WTI oil futures for December delivery are seeking a breakdown below the range area that strictly held the market in a neutral structure during the past four months.
From a technical standpoint, the price is set to cross below the 50% Fibonacci of the downleg from 65.61 to 6.62, at 36.13, following the rejection near the upper surface of the Ichimoku cloud.
Given the weakness in the MACD and the negative slope in the RSI, the sell-off could get new legs in the short term. Yet, traders should also keep in mind that the RSI is fast approaching its 30 oversold level, making any upside reversal or some consolidation possible.
In the negative scenario, a decline below 36.13, and more importantly a close beneath June’s low of 34.48, could squeeze the price towards the 38.2% Fibonacci of 29.17 and the 29.80 mark, which has also been a tough support zone in 2016.
In the event the bearish forces get immediately exhausted, the spotlight will shift back to the cloud’s upper surface which is currently intersecting with the 20- and 50-day simple moving averages (SMA) around 40.15. Running higher, the door would open again for the 61.8% Fibonacci of 43.08, a break of which may stage a more aggressive rally towards the 48.80 restrictive zone.
Summarizing, WTI oil futures are exposed to downside risks in the short term, though there are also some signs of exhaustion in the ongoing bearish action. A drop below 34.48 could confirm additional losses, while a bounce above 43.08 would resume positive sentiment.
