WTI Crude Price Daily Outlook: Will Symmetrical Triangle Breakdowns Sink Crude Under $87?

Quick overview

WTI crude oil (USOIL) is facing a key structural breakdown Tuesday, sitting at $91.21 after a high-volume 1.18% intraday distribution flush. On the four-hour chart, the energy complex is showing its first directional change in months and breaking out from the multi-month sideways range as normalized logistics collide with restrictive macro factors. The major factors to be aware of today include:

1. Structural break of the Symmetrical Triangle After years of range compression, expansionary selling pressure is finally taking hold. WTI crude breached the lower support of the large symmetrical triangle, flipping past support areas into resistance and triggering momentum short-sellers to enter the market.
2. Chokepoint recovery The nine week-old conditional US-Iran ceasefire is holding, as shipping has recovered to 75-82% capacity in the strategically important Strait of Hormuz chokepoint. With shipping volumes recovering at the rate predicted, the risk premium from acute geopolitical risk that was built into the complex in the first quarter is being rapidly eliminated.
3. The macro backdrop for commodity prices In the aftermath of Federal Reserve Chair Kevin Warsh’s official swearing in, macro commodity prices are struggling with an increasingly restrictive interest rate cycle. With April sticky inflation reading at headline 3.8% and 4.1% core, institutional desks have no near-term room left for rate cutting, providing a firm floor to the US Dollar Index.
4. OPEC+ ministerial meeting is just days away With the next OPEC+ meeting just a few days away, trading desks are positioning based on any and all forward looking guidance for output and production quotas as the cartel attempts to navigate voluntary cuts in the face of recovering supply channels.

Technical analysis

The technical picture on the four-hour shows a well-defined bearish continuation structure with the WTI crude price action having broken cleanly below the multi-month symmetrical triangle that developed following a failed attempt to break above the $95.40 upper resistance of the downtrend (Point D). Price action is now testing an area of internal horizontal support between $91.19-$92.49, and is accompanied by a series of red candlesticks below the descending red trendline coming off of the $102.00 peak.

The 14-period RSI is sitting at 45 with a completely flat RSI line, indicating the commodity is not oversold by any means and there is substantial room to fall and fulfill the downside expansion of 8-12.

Resistance to watch: $91.19 (immediate horizontal support, broken), $92.49, and $95.40 (major horizontal pivot and structure)

Support to watch: $87.81 (multiple touches), $86.45 (structure target), $83.04 (lower level support)

Trade plan

We have a breakdown follow-through trade in play on a test of the lower edge of horizontal support

• Order: Execute Sell Stop below the four-hour candle closing below $91.19
• Targets: T1: $87.81, T2: $86.45
• Stop: Above $92.49

Conclusion

Our short-term WTI crude oil price prediction suggests that the commodity is now in the midst of a structural breakdown to the downside with momentum bears fully in control as we head into Wednesday’s weekly commercial inventory update. With increased supply coming from North America’s robust non-OPEC production growth, downside pressure could be somewhat relieved on a near-term basis, however a decade of structural underinvestment throughout the commodity complex keeps upside from being a real probability. Watch for volume expansion at key levels, and be wary of any minor corrective bounce in this environment until there is a structural confirmation of the low.

ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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