Oil Price Analysis: WTI dipps under $40 but there are a few key support levels close by

• WTI is trading over 2% lower on Thursday as a bout of risk-off sentiment sents commodities lower.
• The price is currently hugging the $40 per barrel psychological support area.

WTI 4-hour chart

WTI has struggled on Thursday as a bout of risk-off sentiment sent the US dollar higher. If fairness to oil, the price has been on a decent run in the past few sessions and could be due a correction. The price pushed past the psychological USD 40 per barrel level two sessions ago and bounced off it a couple of times to use the area for support. 

Looking closer at the chart, there was a confluence of the chart pattern and the aforementioned USD 40 per barrel support zone to stem the losses in the short term. If the level does break conclusively the red horizontal line at USD 39.20 per barrel could be next. The black trendline does seem pretty strong as it has been tested four times on this chart alone. Beyond that, there is another support level lower down just above USD 37 per barrel. 

The indicators are showing some bearish signs too. The Relative Strength Index has dipped below the 50 area. If it does break into the oversold zone it could develop a bullish failure swing. This is when the price makes a higher low wave but the indicator makes a lower low wave. The MACD histogram has moved into the red zone but the signal lines are above the mid-point which tells us that we are still in an uptrend. 

Overall on the higher timeframes, this is still very much an uptrend. Traders will be looking to work out if this is just a retracement or indeed a reversal. There could be some buying at the support zones mentioned but if they are all taken out on good volume and momentum it could be a sign of more bearish times ahead.

Additional levels