Tuesday 4th January

Oil closed +0.71% higher on Monday at US$76.22 a barrel. On the daily timeframe, the price continues to test resistance between US$74.18 and US$76.50, marked by prior highs as well as both the 50% and 61.8% Fibonacci retracement levels of the late-October to December 2021 decline. Given the firmly overbought nature of the slow stochastic coupled with a test of resistance, we would be hesitant to turn bullish at this stage, preferring to wait for a decisive close above this region. Often the 61.8% Fibonacci retracement level acts as support or resistance in corrective moves and a decisive close higher would significantly improve the short-term outlook opening potential gains initially to US$80 followed by US$85. Should we see the price rejected at current levels, then this would increase the probability that gains over the past month are corrective, potentially leading to a resumption of the prior downtrend.

On the 4-hour timeframe, the price has drifted sideways over the past week which allowed the slow stochastic to fully unwind to oversold levels. This sets up a likely attempt to break above noted resistance in the coming hours, and with the slow stochastic only at neutral levels, there is room for higher levels. Should we see a break upwards, it is important that any gains are sustained to avoid the potential for bearish momentum divergence to form with the slow stochastic still quite a way off its prior highs. Given the size of the consolidation relative to the prior advance, we would be less concerned about this potential formation given we have seen a relatively substantial consolidation, which increases the likelihood that any gains could be sustained.

*Akbank does not ever provide personal financial advice. Please consider your own circumstances before purchasing any of our products or acting on our general advice, for any Rivkin product or recommendation.