Weak market sentiment suggests more potential correction ahead, stay short. Last night, the WTI Crude ended at USD68.21 and registered a USD1.48 gain. It charted a white candle that breached above the 50-day SMA line, after oscillating between a low of USD66.35 and high of USD68.67. However, this does not change our bearish view, given that the commodity is still trading below the USD72.83 mark in overall. As long as this level is not taken out, we believe that the 1-week bearish bias remains in play. Moreover, we highlight that the 14-day RSI indicator is situated below the 50-pt neutral level at 45.20 pts. This implies a weak market sentiment, thereby enhances our downside view.

In line with the ongoing correction, it is best that traders maintain short positions. For risk-minimisation purposes, we advise setting a stop-loss above the USD72.83 threshold. This follows our initial short recommendation below the USD69.56 threshold on 28 May.

We set the immediate support at USD66.66, obtained from the high of 25 Jan. If this level is taken out, the following support is set at USD64.24, which was the high of 27 Feb’s “Bearish Engulfing” pattern. Towards the upside, our immediate resistance is set at USD69.56, or the high of 17 Apr. The next resistance is pegged at the USD72.83 threshold, located at the high of 22 May.

Source: RHB Securities Research - 31 May 2018