• Slide in oil doesn’t last long as bulls remain in control

• But further gains will depend on whether 50% Fibonacci can be overcome

WTI oil futures (cash) are heading higher on Thursday, reversing an earlier decline to a one-week low of 88.96. The price brushed a 45-week peak of 93.08 on Tuesday, extending the year-to-date gains to more than 15%.

The pullback was to be expected as both the RSI and stochastics had crossed into their respective overbought zones. The stochastics remain tilted downwards, heading towards the neutral level, but the RSI is attempting to re-enter the overbought region. This could be a sign that some further upside action is possible before a more sizeable correction is triggered.

That trigger could be the 50% Fibonacci retracement of the June 2022-May 2023 downtrend at 93.91. The significance of the 50% Fibonacci is underscored by the upper Bollinger band, which is flatlining just above it. A break above this crucial resistance area would green-light a sustained recovery in oil, clearing the path for the 61.8% Fibonacci of 101.04.

But should it succeed in capping gains, the price could retreat towards the 38.2% Fibonacci of 86.77, which corresponds with the 20-day simple moving average (SMA). The 50-day SMA lies not that much lower at 82.75, while further down, the 23.6% Fibonacci of 77.95 could next provide support as it did in August. However, a sharper selloff that pushes the price below the 200-day SMA in the 77.00 region would risk turning the bullish medium-term outlook to neutral.

Overall, this latest fall appears to have been only a minor setback for WTI oil futures and there’s not enough indication at this stage suggesting the uptrend is in danger. However, the 50% Fibonacci will be an important test, while a drop below the 20-day SMA would further weaken the short-term positive bias.