In today's analysis, we're focusing on WTI Oil, which experienced a sharp drop during the overnight session. The decline has been significant, but technically, the breakout that triggered it was not as clean as traders might expect.
The dominant formation in recent days has been a red wedge pattern, which generally signals a bullish correction following a prior drop. On Tuesday, oil broke below this wedge to the downside, but the breakout was short-lived. The price quickly returned above the lower line of the wedge, raising doubts about the validity of the move.
However, on Wednesday, sellers regained control. Oil once again broke below the wedge’s support line and this time the move stuck. The sell-off pushed prices down to a blue horizontal support zone — a key level that acted as resistance back in April and May. This zone has now been tested and is currently holding, producing a modest bounce.
So, what’s next? The path forward depends on how price behaves around these key technical levels:
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A move back inside the wedge would create a false breakout pattern, which is typically bullish and could trigger a buy signal.
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On the other hand, a decisive break below the blue support would confirm bearish momentum and act as a strong signal to sell.
WTI is at a crossroads. Keep a close eye on how the market reacts around these lines — the next big move is likely brewing.