WTI crude oil suffered an unprecedented fall last week when it was dropped like it was hot from a high of $114.81 per barrel to a low of $94.65 in a matter of days. Since then oil prices have rebounded again. However, it appears that oil could bound for another dip in the near term.
As you can see from its 4-hour chart above, WTI crude oil looks to have formed a rising wedge pattern in its recent run-up. Technicians consider this this pattern as bearish since it generally just indicate a temporary rally in prices following a deeper descent. Notice also that is is already nearing the 50% Fibonacci retracement level, using its last high at $114.81 and the low of $94.65 as swing points. Additionally, the presence of a hidden bearish divergence, where the price makes lower highs and at the same time its stochastics register higher highs, suggests of a possible downbeat turnaround soon. Moreover, crude oil’s condition appears to be already overbought as indicated in its stochastics. A breakdown, therefore, from the rising wedge pattern could sent it back to its recent low.