If you're a fan of the technicals, this is shaping up to be one of the more interesting charts this week.
As Eamonn pointed out earlier, there isn't much to really pinpoint about oil's sudden drop today but perhaps it is a confluence of factors instead. There has been a notable retreat since the latest jump above $120 earlier in the month but we are now seeing price hit key technical levels and that may cause a bit more of a fuss.
The big picture view is that the market remains tight but amid recession fears, China lockdowns, and Biden trying to claw his way back before the midterms later this year, there are also reasons weighing on oil at the moment.
The latest retreat today brings into focus key levels on the chart, with the trendline support (white line) at $106.44 looking to give way, though the 100-day moving average (red line) at $105.39 is providing some added support nearby. Just below that is the 61.8 Fib retracement level of the recent swing higher at $104.69.
That provides a confluence of support levels for oil and so if we do see price break lower, that will be a significant win for sellers.
The 100-day moving average in particular is a key technical level to be mindful of, as oil hasn't traded below that since December last year.
I'd be inclined to go in search of dip buying opportunities and this is a pretty decent spot. However, I wouldn't throw everything in at one go as a drop from here will quickly draw into focus the $100 mark and then potentially the swing lows since March around $95 next. A push towards the latter might offer more value in terms of a structural trade, even more so if price does swing towards the 200-day moving average (blue line).
