By Nadia Simmons
On Friday, crude oil extended losses after news that Saudi Arabia will freeze production only if Iran does the same. In this environment, light crude moved sharply lower and closed the day under $37. What’s next?
Let’s examine charts and try to answer this question:
The first thing that catches the eye on the medium-term chart is a breakdown under the red declining support line. With the last week’s downswing crude oil declined also under the lower border of the blue consolidation, which is an additional negative signal that suggests further deterioration. But are there any factors that could hinder a pro-bearish scenario? Let’s examine the very short-term picture and find out.
From this perspective we see that the commodity dropped under the first support area (based on the late-Dec, Jan and early-March highs), which triggered a sharp decline on Friday. Thanks to this move, light crude approached the next support zone created by the 38.2% Fibonacci retracement (based on the Feb-March upward move), bottoms of the previous pullbacks and the lower border of the blue declining trend channel, which could encourage oil bulls to act. If this is the case, and light crude rebounds from here, we may see a test of the strength of the upper line of the trend channel (currently around $38.23) in the coming days.
crude oil closed the previous week under the medium-term red declining support line and the lower border of the consolidation, which doesn’t bode well for the commodity. Nevertheless, Friday’s decline took light crude to the next support zone, which could encourage oil bulls to act in the coming days.
Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
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