Brent crude oil has retreated over the last few hours after a sharp bullish rally in the past five days. On Thursday, the price posted a fresh more than three-year high of 77.94 and currently is paring some of its gains. However, the short-term technical indicators are bearish and point to more weakness in the market.
Looking at the 4-hour chart, oil prices are still developing above the 20- and 40-simple moving averages (SMAs) and are still pointing up. Meanwhile, the RSI indicator bounced off the overbought level and is losing ground, while the %K line of the stochastic oscillator posted a bearish cross in the overbought levels with the %D line, suggesting bearish retracement.
Upside moves are likely to find resistance at the more than three-year high of 77.94. Rising above this area would help shift the focus to the upside again towards the next immediate handle of 78.00. Breaking this level could see a test of the next psychological levels of 79.00 and 80.00.
In the short-term, the bearish phase remains in play especially if prices continue to trade below the high of the day. The next stop would come at 76.30, which coincides with the 20-SMA. Breaking this level, the price could move towards the 23.6% Fibonacci level of 75.33 of the upleg from 66.85 to 77.94. A successful close below this region could open the way for a touch of 38.2% Fibonacci mark of 73.71.
In the bigger picture, the market is bullish since April 6 following the rebound on 66.85.