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Chart of the day: is WTI crude oil set to further fall?

crude oil

Crude oil prices tumbled on deteriorating sentiment, triggered by weak Chinese economic data on Monday.

The sell-everything mood sent crude prices to a one-week low. Oil prices may face further pressure if recession fears cause bad loops in risk assets, which could mean such a scenario as shown in the below charts.

INADWTIC (WTI Inflation Adj Index) Index vs S&P 500 (1997-2022)

Source: Bloomberg (Click to see the enlarged chart)

The above chart implies a positive correlation between the oil price and the S&P 500. Oil prices fell together with broader equities in the recessions of 2000, 2008, and 2020. The trends need to be closely monitored in the scenario of an upcoming economic recession or a recession fear-induced sell-off.

WTI Daily chart

There's a potential break-out on the ascending trendline.

(Click to see the enlarged chart)

The WTI price is testing the trendline support of the 100-mark, where a bearish breakout may induce a further sell-off and head to the pivot support, a price range of 94.00 -95.35 (the 50.0% of Fibonacci retracement starts from the high on 7 March to the low on 11 April).

Key technical elements:

  • A potential double-top pattern is formed, suggesting the downside pressure starts to build.
  • Stochastic forms a dead-cross, falling from the overbought territory, which indicates a sell signal.

Key STs and RSs:

Supports: 100, 94.00, 95.35, 88.80

Resistances: 104.62, 112.07

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