Technically, US Oil (WTI) appears to have formed a Positive Reversal, whereby daily RSI made a lower low, but price failed to confirm the low by making a higher low. The thought process behind a positive reversal is that it shows price is outperforming the underlying indicator, hence it’s a bullish indication. Additionally, WTI was supported by the daily 144 & 169 EMA’s in mid-March and again at the beginning of May while the 13-day sma remained above these moving averages – Suggestive of further potential upside on the horizon. The rally this week was propelled by the US Department of Energy’s weekly crude oil inventory report (as of May 16th), which showed a draw of 7.23M barrels vs. expectations of a mere decline of 5.6K, and this was a real shocker when compared to the week priors build of 947K barrels – This was highlighted earlier this week by my colleague Fawad Razaqzada.
The positive reversal’s measured move objective at $105.60 resides above trendline resistance, drawn from the March high, and is just points above the 2014 high at $105.20. Interestingly, daily RSI has already broken above corresponding trendline resistance in advance to price (leading indicator?). That said, we would also like to see daily RSI break above the key 65 level, as this would potentially to signify a renewed uptrend in price.
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