Oil Forecast – Relentless Selling Keeps Oil Bulls at Bay

Downtrend in WTI crude oil remains well in place as the lows of a 10-month trading range are exceeded to the downside. Selling pressure continues.

Over the past 10-month consolidation range oil has found support around $50.54 and $50.48. Nevertheless, since oil remains weak today, it has now broken below those lows and continues to slide. Selling pressure has been nearly relentless since the $65.62 peak was reached four weeks ago, with oil down more than 23% since then.

Downward Momentum Intact

Given that momentum has been consistently down, oil may see difficulty continuing the pace of depreciation as the $50.48 price zone is breached. Certainly, oil is closer now to a support that could hold and turn price than it has been in recent weeks. Note that the 14-day Relative Strength Index (RSI) is clearly in oversold territory but with no indication yet of a change in recent price behavior.

Next Possible Support

There have been three prior major declines since the April 2019 swing high of $66.47 was reached in April of last year. The first drop was the largest with a decline of $15.92 or 23.96% to a low of $50.54.

As of now, oil will match that depreciation on a percentage basis once it reaches $49.93. Therefore, it is a price area to watch for some signs of a possible reversal on the lower time frame, such as an hourly chart, or wait for a daily reversal signal.

Further down is a declining trend line across the bottom of the long-term consolidation phase. This would be the next area where some support might be seen. However, we’ll have to keep an eye on the relationship between price and the line as it is approached to determine the price. As of now the line is at approximately $49.25.

More Significant Support

The next more significant potential support zone is from approximately $47.57 to $46.45, which consists of the 78.6% Fibonacci retracement level and a 127% Fibonacci extension, respectively.

Enter the Bear Trend
For aggressive traders, a pullback on the 1-hour chart can be watched for a potential entry to capture further downside in the short-term.