West Texas Intermediate oil futures are trading lower on Tuesday, after having registered a significant crash in the overnight session, mainly due to the liquidation of long positions for fear of reaching a new nuclear agreement between the United States and Iran, or that Russia and Ukraine ransacked a peace agreement.
At 12:47 GMT, WTI futures may be worth $95.13, down $6.05 or -5.98%. For the month, the United States Oil Fund (USO) ETF stands at $72.82, down $3.58 or -4.69%.
In the end it all comes down to what happens between supply and demand. In this case, negotiations on a ceasefire and the possibility of Iran injecting more oil into the markets reduce concerns on the supply side, while the increase in COVID-19 cases in China is causing increasingly concerned about the demand.
Technical analysis of the daily swing chart
The main trend is up according to the daily swing chart but it will change to down if oil breaks through $85.81, while breaking above and $126.42 would resume the uptrend.
The minor trend is also bullish but if we cross $88.49 it will turn bearish, plus that would also turn momentum lower.
The short-term range is from $85.81 to $126.42 and the market is currently trading on the weak side of the detection zone found between $101.32 and $106.12, which made it a resistance.
The main range is $61.86 to $126.42 and we are currently testing the $94.14 to $86.5 recovery zone which made it potential support.
Daily Spin Chart Technical Forecast
The direction of the May WTI Crude Oil futures contract this Tuesday will likely be determined by trader reaction to the main 50% level at $94.14.
A sustained move above $94.14 will signal the presence of buyers and if this move is able to build upside momentum you may see a possible short-term test of the retracement zone from $101.32 to $106.12.
A sustained move below $94.14 will signal the presence of sellers and if it creates enough downside momentum then expect the price to extend to the Fibonacci drop at $86.52, which would also be the last support before the main bottom at $85.81.
The price dynamics suggest that retail speculators based on the headlines bought crude near highs after President Biden announced a ban on Russian oil exports and may now liquidate or sell those losing positions at a later date. value zone between 94.14 and 86.52 dollars. We also see the pros likely to look to buy after the recent break down hoping for a subsequent rally. Basic this story would be a clear example of “buy on the rumor, sell on the fact” where beginners might have been late to the moves.
We won’t know if a major top forms on the chart until the trend turns down, or a lower secondary top forms, so be prepared to see volatile moves in both directions.
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This article was originally published on FX Empire