Bottom line: WTI Crude short term structure might be turning bearish against $41.60 resistance. Bears are looking poised to turn lower towards $25.00 and $15.00 over the next few weeks.

Fundamental Outlook:

DAX opened gap up yesterday and managed to close higher by +1.6%, closing at 12733 mark. The indice was backed by Asian Markets, Nikkei closed the day up +1.8% and Nifty +1.47% respectively. The US Markets were no different as Dow Jones and SPX500 managed to close higher by almost +2.0%.

COVID-19 infections have crossed over 11.7 million mark and deaths over 540,000 globally. Lately, United States and India (over 700,000 now) are witnessing a steep rise in infections and many states have re-imposed lock down.

Global Markets have continued to defy and ignore most economic conditions discussed earlier, as they continue their rallies. Since March 2020 lows, indices have recovered almost all loses as investor psychology remain optimistic.

The fiscal stimulus offered by Central Banks could be the only reason behind this relentless buying of stocks. We want to remind of a similar situation in February 2020 and that too much of optimism might be a warning signal of a potential turn.

WTI Crude has again faced selling pressure around the $41.00 mark yesterday. The commodity trades below $40.50 as we prepare to publish and could slip further towards $32.00/33.00 per barrel.  

Technical Analysis:

WTI Crude had tested resistance around $41.40 levels yesterday, before slipping lower again. The commodity trades around $40.40 at this moment and is looking to drop further towards $25.00 levels. Traders can expect some support around $25.00 levels, going forward.

WTI Crude had rallied post historic lows in April 2020 at $0.01 mark. Bulls were in complete control as they had managed to carve a series of higher highs and higher lows through $41.60 levels. A drop below $37.17 would confirm an intermediary top in place and prices turning lower towards $25.00 at least.

Also note that fibonacci 0.382 retracement is passing through $25.50 levels. Hence probability remains high for a bullish reversal if prices manage to reach there. Traders might be inclined to remain flat for now and allow for a corrective drop through $25.00 levels.

Prepared by

Harsh Japee, Technical Analyst.

WTI Crude Chart

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