Can Crude break out of downtrend?

• Fed pivot last week sparked oil price recovery; extended by Red Sea disruptions
   
• Crude now testing resistance at downward trendline
   
• Elliot Wave: correction wave now underway
   
• "Death cross" looms for crude oil
   
• Traders set to react to US crude stockpiles data later today

Oil has been building on gains following the Fed’s policy pivot last week.

More recently, crude prices continue to push higher following concerns about the disruptions in oil supplies by Houthi rebels .

Shipping companies are reportedly diverting from the less expensive Red Sea route for longer and costlier supply routes, threatening to limit supplies for global consumers.

If disruptions to oil supplies continue, stakeholders could expect to see Crude prices rally further.

Also, US Crude oil inventories are due later today at 3:30 pm GMT.

This data should shed more light on any imbalances in the supply and demand of the black gold.

Markets are currently expecting a drawdown of 2.3 million barrels.

However, a smaller-than-expected decline in US stockpiles, which implies weaker oil demand in the world’s largest economy, may prompt oil benchmarks to pare some of their recent gains.

From a technical perspective ...

Crude prices are currently above its 21-day SMA and finding resistance along the downward trend line drawn from October 20th, 2023.

 From an Elliot Wave perspective, the black gold has completed a 5-wave impulse decline and is seeing a correction (A-B-C) underway, starting from the end of wave 5 at $67.67.

Furthermore, crude oil prices confirm the positive divergence, earlier highlighted by the Relative Strength Index on December 12th, 2023, as we see the RSI tether along the 50 mid-way line.

Crude bulls will be looking to stay buoyed with strong moves above these levels.

• $73.31:current trendline
   
• $73.57: the 50.0 Fibonacci level
   
• $74.96: the significant 61.8 golden mean Fibonacci level.

The Fibonacci retracement level is drawn from the November 30th high of $79.15 to the December 13th low of $67.67.

If prices continue to rally above these levels, the 200-day SMA is expected to act as the next near-term resistance.

On the other hand, Crude bears may see a failure to break above the following levels as a signal for further price declines.

Also, keep watch over the prospects of a “death cross” – the 50-day SMA is threatening to break below its 200-day counterpart.

A “death cross” may well send a bearish signal to traders.