OPEC. Will they? Won't they? Can they? Crude oil prices are much higher in just five weeks, partly due to speculation that OPEC and fellow travelers such as Russia will come to an agreement to cut production. Yet over the last decade this international cartel has agreed much and delivered little, with many member nations pumping well over their quota. If this is a main driver of recent gains, in my view it is very likely to disappoint.
And technical traders are very likely nodding their heads.
The chart above shows why. First, the last two trading sessions saw West Texas drop back below the June high at 51.41, displaying the characteristics of a classic false break. Secondly, the oil price is diverging from the RSI, making higher highs while the RSI makes lower highs. Many chartists will interpret this as a failing trend.
This does not guarantee a down swing. However, a retracement appears more likely than not, and a new downtrend targeting support around $42.60 cannot be ruled out.