Brent crude oil traded south yesterday, breaking below the key support (now turned into resistance) zone of 75.45. The dip also brought the price below the long-term upside support line drawn from the low of the 21st of June 2017. This, combined with the fact that Brent has been printing lower peaks and lower troughs below the short-term downtrend line drawn from the peak of the 9th of October, suggests that the near-term outlook may have turned to the downside.
If the bears are strong enough to maintain their momentum and push the battle below 74.00, a support defined by the inside swing peak of the 14th of August, then we may see them initially aiming for the 72.65 zone. Another dip below 72.65 could carry more downside extensions, perhaps towards the 71.50 barrier, marked by the low of the 20th of August.
Looking at our short-term momentum studies, we see that the RSI moved lower and just touched its toe below its 30 line, while the MACD remains below both its zero and trigger lines, pointing down. These indicators detect downside speed and support the case for the black liquid to keep drifting south for a while more.
Even if the price rebounds somewhat from near current levels, as long as the recovery stays limited below 75.45, we would maintain our bearish stance. Brent would still be trading below both the aforementioned lines. We would like to see a decisive break above 77.00 before we start examining the case for a reversal back to the upside. Something like that could confirm the break above the short-term downtrend line, as well as the return above the long-term upside support line taken from the low of the 21st of June 2017.
A break above 77.00 could initially target the high of the 29th of October, at around 78.00. That said, we would like to see a move 78.35 before we get confident on more advances. Such a move could pave the way for the 79.85 zone or the peak of the 19th of October, at around 80.40.
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