WTI crude oil is under pressure again on Tuesday and is on course to test this year’s lows, set on 18 March, of $42.70.
A rally at the start of the week off a prior support – $43.20 – potentially suggested we were going to see some consolidation or a correction but that has certainly not materialized.
A break below yesterday’s low, albeit marginal, appears to suggest there remains further downside potential here. The next support is the 18 March lows and a break of this could see $40 come under significant pressure.
It should be noted that we are seeing divergence between the MACD histogram and price action which may suggest the sell-off is losing steam.
Alone, this doesn’t mean very much, as we saw when it made new lows on 28 July on falling momentum before continuing to decline.
On this occasion, though, we are at a key technical support, 2015 low. A failure to break below $42.70 followed by a reversal setup such as bullish engulfing pattern or something similar would suggest that a bigger correction or reversal may follow.
We have to remember that WTI has experienced six weeks of decline despite already being at very lows levels. A correction, at least, would not be a surprise.
A failure at this level again may also confirm it as a floor in the price with it having experienced support on two other occasions.