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.
Supply Dynamics
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.
Demand Concerns
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.
Indicators:
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.
Trading Insights
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.
Trade Suggestion:
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.
Conclusion
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.
