It was a roller coaster ride of a week last week for all major asset classes, but the moves in oil were perhaps the most harrowing. West Texas Intermediate (WTI) crude oil opened Monday’s trade near $34.00, fell by over 13% during the first two days of the week to bottom in the mid-29.00s, surged all the way back to a high near $33.50 on Thursday, and finally turned lower Friday to trade back below 31.00 as of this writing.
Traders will finally get a chance to catch their collective breath this weekend, and when they do, they may conclude that the recent downtrend in oil prices remains intact. As the chart below shows, crude remains in a well-defined bearish channel, despite this past week’s volatility, and as long as resistance in the 34.00-50 zone holds, that trend remains the friend of bearish traders.
Looking to the secondary indicators, the consolidation over the last 3-4 weeks has taken the RSI well out of oversold (
Of course, there are a number of fundamental developments that could impact oil’s trajectory in the coming days, but lately the news-price action causality has been running in reverse; in other words, oil is moving based on global risk sentiment, and these moves in oil impact how traders interpret data releases, rather than the news impacting price action. Whether this dynamic will continue remains to be seen, but for now, the price action in the oil market is one of the most important developments for traders of all stripes to watch.
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