WTI Price Analysis: Big move looks overdue

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  • WTI’s daily chart shows a Bollinger band squeeze. 
  • Low-volatility consolidation often ends with a violent move.

West Texas Intermediate (WTI), the North American oil benchmark, could soon witness a big move in either direction. 

That’s because, the spread between Bollinger bands – volatility indicators placed 2 standard deviations above and below the 20-day simple moving average of price – has narrowed sharply due to the 1.5-month-long sideways churn in the range of $37 to $43. 

Meanwhile, the Bollinger bandwidth, also a volatility indicator calculated by dividing the spread between the volatility bands by the 20-day SMA, has declined to 0.05  the lowest level since September 2018. 

A prolonged period of low volatility consolidation or bull-ber tug of war often paves the way for a strong directional move. 

Focus, therefore, is on the Bollinger bands, currently located at $40.22 and $42.37, respectively. 

A strong move above the upper band would imply a bullish breakout and expose resistance at $49.41 (Feb. 5 low). On the other hand, a break below the lower band would signal an end of the bounce from lows below $10 observed in April and shift risk in favor of a drop to support at $34.38 (June 15 low). 

Daily chart

Trend: Neutral

Technical levels

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