Brent and WTI oil prices hint at rebound from lows

[MongiIG]

Oil prices are back to levels last witnessed in late 2021 and well below the levels preceding Russia’s invasion of the Ukraine.

Source: Bloomberg

 

Commodities Price Brent Crude Petroleum WTI

 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 16 March 2023 

Oil prices have sold off as global risk appetite wanes and the threat of recession reemerges. The downtrends in oil markets are exxagerating in the near term as hedging of the commodity seems to be taking place as demand expectations diminish while supply thereof could be in excess thereto.

The resulting effect has seen oil prices back to levels last witnessed in late 2021 and well below the levels preceding Russia’s invasion of the Ukraine.

Brent crude – technical indicator assumptions

 

Source: IG

The 20-day simple moving average (red line) (20MA), trading below the 50-day simple moving average (green line) (50MA), which in turn trades firmly below the 200-day simple moving average (blue line) (200MA) considers proper order of these indicators and confirms the downtrend in place for brent crude oil.

The stochastic does however suggest that the price of the commodity is in oversold territory right now.
These indications in aggregate suggest that the price of brent crude could be setting up for a shorter term rebound before the longer-term downtrend resumes.

Brent crude – price action

 

Source: IG

The price of brent crude has recently broken support (79.50) of the short to medium term range, before trading through multiple levels of support. Trend followers who are not already short might hope to find new short entry on a rebound from oversold territory towards the 79.50 resistance (previously support) level. Ideally the rebound should end with a bearish reversal (candlestick pattern) before resistance.

In this scenario, 75.40 and 69.50 would become the downside support targets from the move, while a close above either 79.50 or the reversal high might be used as a stop loss indication for the trade.
Should a rebound from oversold territory take the price back above 79.50, we would still be looking for the move to end with a bearish price reversal before the 8870 level to look for short entry.

Only on a move back above the major high at 88.70 would we reassess the merits of a new long bias to trades on the commodity.

WTI crude – technical analysis assumptions

Source: IG

Similarly, to what we see on brent crude, the moving averages (20MA, 50MA and 200MA on WTI Oil (US crude) also show proper order for the downtrend on oil, while the stochastic oscillator suggests that the commodity price is oversold in the near term.

The price of WTI crude has recently broken support (70.70) of the short to medium term range before extending its trend lower. Trend followers who are not already short might hope to find new short entry on a rebound from oversold territory towards the 70.70 resistance (previously support) level. Ideally the rebound should end with a bearish reversal (candlestick pattern) before resistance.
In this scenario, 62.55 would become the next downside support target from the move, while a close above either 70.70 or the reversal high might be used as a stop loss indication for the trade.

Should a rebound from oversold territory instead take the price back above 70.70 level, we would still be looking for the move to end with a bearish price reversal before the 82.50 resistance level for short entry.

Only on a move back above the major high at 82.50 would we reassess the merits of a new long bias to trades on the commodity.