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Prices Rebounded After Breaking Below Key Support, but Bearish Trend Remains Unbroken
Commodity
Summary:
Trump's blockade of Venezuelan oil tankers spurred a rebound in oil prices, but the pressure from global oversupply remains immense.
Buy
PENDINGWTI
EXP
55.500
Entry Price
59.180
TP
52.790
SL
57.061 +0.668 +1.18%
--
Point
PENDING
52.790
SL
CLOSING
55.500
Entry Price
59.180
TP
Fundamentals
On Wednesday during Asian trading hours, oil prices rebounded from their lowest levels since 2021 after U.S. President Trump escalated pressure on Venezuela by seizing an oil tanker. However, signs of global supply glut continued to weigh on the market, with indications of weakness emerging from the Middle East to the U.S.
Investors are bracing for what the International Energy Agency forecasts will be the largest supply glut since the pandemic began. The oversupply is primarily driven by OPEC+ rapidly restoring idle capacity and other oil-producing nations increasing output, putting crude prices on track for an annual decline.
Traders are still weighing the possibility of Ukraine reaching a peace agreement, which could pave the way for easing restrictions on Russian crude exports.
Technical Analysis
WTI crude oil prices have been falling recently, breaking through multiple support levels, and are currently trading around US$56.45.
The price of this commodity is undergoing a minor pullback from its recent low near US$54.87, potentially testing a key resistance level as sellers may be waiting for an opportunity to act. Currently trading below the downtrend line, with the 100-day SMA also below the 200-day SMA, this further confirms the likelihood of a downward price movement.
The Fibonacci retracement lines drawn from the high of US$57.88 to the low of US$54.87 reveal potential resistance zones where the pullback may stall. The 38.2% retracement level is at US$56.10, while the 50% retracement level is at US$56.44.
A larger pullback could reach the 61.8% retracement level at US$56.78, which is very close to the descending trendline resistance. This level is likely to act as strong resistance for this pullback.
If the retracement level or trendline resistance holds, WTI crude oil prices may resume their decline, retreating to recent lows and potentially breaking below US$54.87 per barrel to establish new lows. Conversely, a decisive break above the 61.8% retracement level and trendline would signal a resurgence of upward momentum.
The stochastic oscillator has climbed out of oversold territory and broken above the 50 midpoint, indicating buyers have gained some near-term momentum. However, the oscillator is approaching levels typically associated with bearish reversals, suggesting a move lower from current levels could signal sellers are poised to regain control. Nevertheless, the oscillator still has room to rise before reaching overbought conditions, implying the pullback may extend slightly further.
The Relative Strength Index (RSI) is also rebounding from oversold territory, currently hovering near 40. The indicator remains some distance from the 50 midline, suggesting prices may continue to follow the RSI trend as buyers attempt to push prices higher.
Trading Recommendations
Trading Direction: Buy
Entry Price: 55.50
Target Price: 59.18
Stop Loss: 52.79
Valid Until: January 2, 2026 23:55:00
Support: 54.87, 53.96, 53.21
Resistance: 56.44, 56.78, 57.88
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