Markets are spooked after yesterday's dismal performance saw US equity indices close down 2% plus, leaving many asking one thing: Is today's rebounded to be short-lived? A short-squeeze perhaps? Or are players just lightening the load ahead of major US data risk later this week? Continued weakness from the US data front has brought up demand concerns for crude and the recent rally now looks vulnerable. Despite the recent strength seen off the January low, the commodity is still down 1.19% on the year and the technicals warrant caution for a possible turn around in the near-term.
A trendline off the August highs which currently overlaps the 100-day moving average is now key and although crude oil closed above it last week, a quick recovery risks a false break scenario here. Divergence in price and the stochastic indicator have added to the bearish tone and if price manages to dip below the monthly pivot at 95.85, further losses likely into the S1 at 92.80 and the 2014 low 91.21.
Crude would need overtake last month’s high to validate the trendline break. Major resistance is around 100.60 where R1 and December high stand. A move beyond the R1 shifts the focus on to double bottom targets towards the 2013 highs around 109. Seems like it's make or break time for crude oil.