The crude oil bears appear to be back in action!
A drop that is the same height as the chart pattern is anticipated after the commodity price broke through the bottom of the falling wedge that is visible on short-term time frames.
However, to get additional selling, there might need to be a downturn first. The 38.2% retracement level is already being tested by oil, according to the handy Fib indicator, which may limit advances.
If so, the price may return to the swing low of $72.21 per barrel or even lower. On the other side, a stronger decline might push prices up to the 50% Fib at $75 per barrel, which is close to the broken wedge support.
The likelihood of further negative swings is indicated by technical indicators. The fact that the 100 SMA is below the 200 SMA suggests that the downward is the direction of least resistance, and Stochastic is already showing signs of buyer tiredness.
Over the past several days, commodities and other risk assets have been struggling, largely due to positive U.S. data that suggests the Fed will continue raising interest rates.
Despite this, crude oil was able to rise early this week as the Chinese economy started to gradually recover.
In addition, when a significant earthquake rocked Turkey and disrupted operations at the Ceyhan oil port, supply issues are resurfacing.
You'd better pay close attention to the API and EIA's scheduled inventory data later this week to determine whether the oil selloff could continue.
