Oil prices have experienced a significant downturn, with West Texas Intermediate (WTI) crude trading near $73 a barrel, marking over a 20% drop from the year's high in September.
This slide into a bear market reflects the impact of robust supply outpacing geopolitical risks and OPEC+'s efforts to stabilize the market.
Despite OPEC+ cuts, U.S. crude inventories have risen for the fourth consecutive week, reaching their highest since August, driven in part by an 8% stockpile increase at Cushing, Oklahoma.
Global production growth has outstripped demand, challenging OPEC+'s ability to control prices.
China's oil demand showed signs of decline in October, with refiners scaling back processing rates. In the U.S., an uptick in unemployment claims could signal a cooling in the largest crude market. This confluence of factors contributes to the bearish outlook.
Oil Technical Analysis: Bearish Signals for WTI
Yesterday's Trend: A clear downtrend is evident, with prices breaking below key support levels.
Pivot Point Analysis:
Pivot Point: 73.75
Current Price: Below Pivot Point, indicating bearish momentum.
Volatility: Expanding Bollinger Bands suggest increased market volatility.
Moving Average: Prices below the 20 SMA signal a bearish trend.
Ichimoku: Price beneath the Ichimoku cloud confirms downward momentum.
RSI: Nearing oversold territory at approximately 31; watch for potential retracement.
Bollinger Bands: Approaching the lower band, potentially signaling oversold conditions.
Targets for Taking Profits (Short Position):
1st Target: 71.31 (1st Support)
2nd Target: 69.71 (2nd Support)
3rd Target: 67.27 (3rd Support)
Stop Loss Guidelines:
Sell: Set stop loss slightly above the pivot point at 75.35 (1st Resistance).
Trade Probability: Approximately 65% given current trends and indicators.
Consider short positions on retracements to the pivot point.
Monitor RSI for divergence which may signal a possible trend reversal.
Keep an eye on the lower Bollinger Band for potential price rebounds indicating short-term reversals.
The current bear market in oil reflects a complex interplay of robust supply, tempered demand, and market sentiment influenced by technical indicators.
Traders should remain vigilant, monitoring for signs of a potential reversal while capitalising on the prevailing downtrend.