Market update: WTI oil faces potential decline

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Crude oil prices may be readying to extend lower; daily chart is maintaining a broader bullish bias but, bearish Head & Shoulders in focus on four-hour chart.

 

Source: Bloomberg

 

Shares WTI Commodities Market sentiment Price of oil Petroleum

 

Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Wednesday 23 August 2023 

WTI crude drops lower

WTI crude oil prices may be reading to extend lower following recent technical developments, especially on the four-hour chart. For now, let us focus on the daily setting. Oil is currently on course for a second consecutive weekly loss, which has been fairly unusual for WTI given price action since May.

Is this a sign of technical exhaustion?

In recent days, WTI left behind new support around $78.99 after confirming a breakout under the rising trendline from June. This also followed the emergence of a Bearish Engulfing candlestick pattern. Meanwhile, resistance was established around $81.56. Below current price action, a bullish Golden Cross emerged between the 50- and 100-day moving averages (MAs).

So, while the near-term technical landscape is appearing bearish, the broader upside bias remains focused higher. But, there are brewing signs of potentially more bearish price action to come.

WTI crude daily chart

 

Source: TradingView

Prices sitting above bearish chart

Using the four-hour setting below, we can see the outlines of a Bearish Head & Shoulders chart formation taking shape. Recently, the peak of the right shoulder was established around $81.69. The neckline seems to be around $79.02.

Now, prices are sitting just above the bearish chart formation. Confirming a breakout lower could open the door to extending lower. That would place the focus on the $77.30 inflection point before the 17 July 2023 low of $73.81 comes into focus.

Otherwise, pushing back above the right shoulder may open the door to revisiting the 10 August 2023 high of $84.85.

WTI crude four-hour chart

 

Source: TradingView

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