WTI Crude Oil rallies within downtrend

WTI Crude Oil futures have rallied after testing big support, but declining daily moving averages and tactical retracement levels act as potential resistances within a downward trend, keeping the risk tilted to the downside even in the face of recent tactical strength.

Here are the details.

• Crude oil defended the April and May lows at 55.30-55.12 as support after an undercut to 54.98 in mid December and have since rallied into the 58-handle, where declining 26- and 40-day moving averages from 58.21 to 58.86 could provide an overhang.

• In addition, rallies on WTI that stall within the Fibonacci retracement zone of the late October mid December decline from 57.88 (38.2% retracement) to 59.68 (61.8% retracement) would keep the downward bias intact.

• Interestingly, today's strength to 58.75 has stalled near the declining 40-day moving average and 50% retracement at 58.78-58.86, which could mark resistance.

• It would take a rally above the 61.8% retracement at 59.68 improve the tone and suggest a rally to 62.59 (late October high) and the 63 area (falling 200-day moving average). Until then, the trend for WTI crude oil tilts bearish with risk back to the 55 area and possibly lower.

Chart 1: WTI Crude Oil: Daily chart