Navigating the Oil Market: Critical Support and Major Sell Signal Approaching

Apart from the USD, global demand and actions from OPEC+ countries also affect the oil market. Two weeks ago, oil saw a huge bullish gap after an output cut, but then the volatility subsided, and prices moved sideways. Last week, we saw an upswing and a breakout of the horizontal resistance at 87 USD/bbl (orange), which seemed promising for a new uptrend. However, buyers failed to hold the price above the support, leading to a false bullish breakout (green).

This pattern is usually reliable, giving signals in the opposite direction. In this case, it suggests a decline in prices. The price drop was later stopped by a critical support level at 84 USD/bbl (yellow). This support is significant because if the price breaks below it, oil could start the gap-closing movement, which could be dangerous and potentially drive the price down to 80 USD/bbl (blue).

In light of these developments, my view on oil is negative, and I believe we will witness the gap being closed soon. The first step towards that will be the breakout of the yellow support, which could happen in the near future.