Oil prices have been very volatile this week, with Crude oil moving back under the $80.00 area and briefly dipping towards $76.00 and suffering downside weekly losses of close to $3.00.
Oil prices have recovered slightly this morning after dropping to six-week lows as investors wondered about how much crude major economies would release from their strategic reserves and indeed how much that may actually ease global crude demand pressures.
Looking back, oil prices slumped to their lowest levels since early October by mid-week, after OPEC and the International Energy Agency warned of impending oversupply, while rising COVID-19 cases in Europe increased downside risks to demand recovery.
Traders are still on the fence towards oil prices with so many factors in the mix, such as supply issues and commodity demand. We should also consider the ongoing dynamics with the Biden administration and US inflation.
The Biden administration has asked some of the world’s largest oil consuming nations such as China, India and Japan to consider releasing crude stockpiles in a coordinated effort to lower global energy prices, according to several sources.
This is a big factor to watch over the coming weeks and into year-end and it will likely decide whether we see $70.00 or $90.00 next for crude oil prices.
Looking at sentiment metrics, bullish sentiment amongst retail participants is particularly high, which is could certainly hint at more losses. The retail crowd are often on the wrong side of the trade, so we do need to consider this.
According to the ActiveTrader market sentiment tool some 83 percent of traders are bullish towards crude oil, leaving plenty of scope for a further downward correction in Crude oil towards the $70.00 level.
Crude Oil short-term Technical Analysis
The lower time frames currently show that crude oil prices are trading within an extremely large broadening expanding wedge pattern.
According to the support line of the typically bullish price pattern crude oil be about to fall towards $74.00 level now that a breakout from this expanding wedge pattern has taken place. To the upside, the $82.50 level is trendline resistance.
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Crude Oil medium-term Technical Analysis
The daily time frame shows that oil has run into rising trendline resistance and could be due for a substantial price correction over the coming days and weeks.
Crude oil has also been extremely overbought according to the daily and weekly RSI, so a technical correction is extremely healthy at this stage. Buying between the $71.00 to $70.00 region could be a great dip-buying opportunity.
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