Sharp Reversal in Oil: Key Support Levels to Watch
08 July 2024
In today's technical analysis, I would like to discuss the sharp reversal currently happening in oil. After climbing higher since early June and reaching new local highs at the beginning of July, oil started a correction on Friday. This correction began precisely at the upper line of the symmetric triangle pattern, marked by the upper orange line, serving as a strong resistance level. Buyers used this level to take profits from the recent bull run, and the correction has since accelerated, with oil dropping sharply today.
The target for this correction seems to be the 38.2 Fibonacci level, which has historically been significant for oil since the end of 2022. This green area appears to be a suitable target, and there is a high probability that the price will test this level as support. Once the price reaches the green area, we will need to observe the market's reaction. A bounce off this support would signal a potential buy opportunity, whereas breaking below this level would suggest continued bearish sentiment.
To summarize, the short-term sentiment for oil is currently negative due to the ongoing correction. We will have a clearer buy signal if the price bounces off the green support or breaks above the upper orange line. Until then, cautious observation is advised.