SINGAPORE: US oil may retest a support at $90.70 per barrel, a break below which could trigger a drop to $88.80.
The drop on Tuesday was so deep that it could no longer be classified as a pullback towards a falling trendline.
Instead, it looks like a continuation of the downtrend from $104.39.
Even though the rise from $85.73 adopted a five-wave mode, it is regarded as a part of an irregular flat from the Aug. 5 low of $87.01.
It would be too early to assume the development of a medium-term uptrend before oil climbs above $97.26. Resistance is at $92.68, a break above which may lead to a weak gain to $93.77.
On the daily chart, the bearish engulfing confirmed both a false break above $94.69 and a reversal of the short uptrend from $85.73.
A neutral zone of $85.73-$97.66 has been established.
Trending signals will remain mixed until oil gets out of the zone.
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