Oil reverses on rumors from China

In today’s technical piece we bring you Oil, which yesterday made the new long-term lows but today, the price is very close to a major buy signal. It may seem weird but let me explain to you how we came to this conclusion.

Yesterday’s drop on WTI managed to break through the lows from September and November and came close to establishing new yearly lows, which were originally set in January. Luckily for the buyers, the help came from Asia where some interesting rumors appeared. Rumors about a possible ending of the zero Covid policy. This of course is positive information for Oil as China is the second largest Oil consumer in the world and zero Covid policy is seriously wounding the demand for this commodity there.

Oil reversed, creating a false bearish breakout (orange). Today, the price is surging further, breaking the November down trendline (red), which is another positive factor helping to improve sentiment here. When the buyers will manage to close the day above that down trendline, a proper buy signal will be created. In case the price will close a day below it, negative sentiment will persist. In my opinion, the first scenario is currently slightly more probable.