Futures market backwardation suggests a sluggish outlook

Defying our expectations, the West Texas Intermediate crude oil rose above $75 and began to form a rectangle pattern between $76.16 and $79.25 (following a breakdown of negotiations between Israel and Hamas). Currently, the USOIL is trading near the lower bound of this range, which also coincides with the 20-day SMA that acts as an alternative support level. On the daily timeframe, the MACD performed a bearish crossover, and RSI with Stochastic reversed to the downside. Simultaneously, the ADX continued lower, indicating a lack of any trend. Yet, despite that, the futures contracts continue to trade backward, which suggests the market’s sluggish outlook for the oil’s future price.

Illustration 1.01

Illustration 1.01 shows the USOIL’s daily chart and simple support/resistance levels.

Illustration 1.02

The MACD line and signal line performed a bearish crossover. However, they are still within the bullish area above the midpoint.

Technical analysis
Daily time frame = Neutral
Weekly time frame = Neutral

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DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.

Comment:

In the latest developments in the Middle East, Israel launched an attack on Lebanon's Bekaa Valley (for the first time since the start of the Hamas-Israel War).