Posted on August 8, 2017 at 9:04 am GMT
Selena Nicholas, XM Investment Research Desk
WTI oil futures maintain a neutral bias on the 4-hour chart after a strong rally that took place between the July 24 low of 45.38 to the August 1 high of 50.40. Prices have been moving sideways in a range between 48.50 and 50.00 during the past one week as upside momentum faded when the market became overextended. This was indicated by the RSI which rose above 70 into overbought territory.
The RSI has not shown any clear sense of direction lately and has been pivoting around the 50 level, which separates bullish from bearish territory. The 20-period simple moving average (SMA) is converging with the 50-period SMA which is also an indication of a lack of trend.
Immediate resistance is at the key psychological level at 50.00. Breaking it could increase bullish momentum to target the 50.40 high with scope to rise further towards the 60.00 area. The next major peak is the May 25 high of 51.97.
Alternatively, if support at 48.50 fails to hold, an accelerated decline could follow since this is an important level. It is the 38.2% Fibonacci retracement of the most recent rally from 45.38 to 50.40. Below this, the near-term trend would shift out of neutral to a more bearish one. The next support level comes into view at 47.88, at the 50% Fibonacci. A deeper decline would see prices enter the 47.00 area before reaching 45.38.
There are no clear signs of a trend in the near-term and the consolidation phase is expected to hold between 48.50 and 50.00 until there is a shift in momentum and prices break out of either side of the range. In the bigger picture, the uptrend from 45.38 to 50.40 remains intact and the market is now consolidating this move.