West Texas Intermediate (WTI), the benchmark for New York-traded crude oil prices, staged a sharp course correction on Thursday; however, hits another wall of resistance from $71.00-60 per barrel.
Prices traded higher as market participants continued to digest data released Wednesday that showed a more than a 5-million-barrel weekly decline in U.S. crude inventories but also revealed a 7-million-barrel increase in gasoline stockpiles, along with a weekly decline in implied demand for the fuel.
Oil prices briefly dropped toward the session low around the time news related to Iranian sanctions emerged on Thursday.
News sources reported that the Biden administration lifted sanctions on some former Iranian officials and energy companies.
Eyes now turn to the closely watch Baker Hughes oil rig count update.
Viewing the technical assessment, the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator is close to the overbought zone.
However, we need to keep an eye on the pattern as bearish divergence is potentially forming.
Divergence is a popular trading signal because they are dynamic and often offer a reliable, high-quality trading signal reversal when combined with other trading tools and concepts.
In technical analysis, divergence can be an important warning signal that a bullish or bearish trend is coming near an end.
Divergence appears when a technical indicator (oscillator) begins to establish a trend that disagrees with the actual price movement.
These “disagreements” are strong signals and somewhat useful for the trader/investor.
Towards $71.00-60 resistance level, bulls should be wary in the event of a bull-trap, while the immediate support is seen at $68.55-65, with $67.50-55 viewed beneath.