- Revelations from the Middle East have pushed oil prices higher
- WTI goes towards $63
- Some warning signals seen at a H4 time frame
Oil prices have pushed higher recently on the back of fresh revelations coming from the Middle East. Back to October it needs to underline that increases were underpinned by hopes that the OPEC and Russia would extend their output cuts deal. In turn yesterday’s rally was sparked by news from Saudi Arabia where the king Salman ibn Abd al-Aziz dismissed his four ministers as they were charged with corruption. In turn two crucial reports will be unveiled later today (API and DoE). We’ve already written more about the fundamental view of oil in this analysis.
Oil prices are approaching constantly a key resistance at around $63 where the peaks from 2015 are placed. However, buyers might face some hurdles a bit earlier as $59 may be a hard handicap as well, notice that this level is supported by a 38.2% retracement, hence its relevance increases.
There is no doubt that having regard to such an astonishing surge in oil prices investors might be more vulnerable to any bearish signals. As for now we may spot that the price is realizing a reach stemming from an inverted head and shoulders pattern (SHS), however RSI suggests that we’ve already entered an overbought area for the first time for many years. That said, it’s worth keeping a close eye on the price when it achieves an upper boundary of a channel. Let’s add that $54 could be treated as a major support at this time frame.
RSI still hovers above 70 points which points to possible overbought. Once the price moves below this barrier, it could be a warning signal. Although a bearish scenario might happen in the nearest future notice that the price broke through two upper limits of ascending channels suggesting that impetus is powerful. Seeking any supports one may point to two broken boundaries.
Using the overbalance strategy which assumes that a move persists as long as the largest correction within this move is broken it needs to pay attention to three levels: $1.3, $1.8 and $3.8. Looking at the chart below one may suspect that the probability of a pullback ticks up due to some bearish candlesticks emerging above $57.2.