Crude Oil H4 – Bears are testing the market

Written on 31/01/2022 by Theunis Kruger, FX Trainer at FXTM

Crude Oil on the H4 time frame was in an uptrend until a higher top was reached on 28^th January at 88.21.

A closer look at the Momentum Oscillator revealed a negative divergence between points ‘a’ and ‘b’ when comparing the higher tops at 87.98 and 88.21. This could have alerted technical traders that a possible change in momentum was on the way.

After the higher top, bears started testing the waters and the price broke through the 15 Simple Moving Average. The Momentum Oscillator also confirmed the bearish action by touching the baseline with bearish intent.

A possible critical support level formed when a bottom was reached later on 28^th January at 85.85. The bulls then tried to drive the price higher, but a possible resistance level was reached on 31^st January at 87.43.

If Crude Oil manages to break through the critical support level at 85.85, then three possible price targets can be considered from there. Attaching the Fibonacci tool to the bottom at 85.85 and dragging it to the top of the resistance level at 87.43, the following targets can be calculated. The first target is estimated at 84.87 (161.8%). The second price target can be forecast at 83.29 (261.8%) and the third and final target might be anticipated at 80.74 (423.6%).

If the resistance level at 87.43 is broken, the above scenario is no longer valid.

As long as the bears continue to dominate with supply overcoming demand, the outlook for Crude Oil on the H4 time frame will remain bearish.

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Nigel Frith

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