WTI Oil futures: Is the sell-off overdone? [Video]

• WTI oil futures test critical 2023 support zone.

• Technical signals point to oversold levels.

• Sellers await a weekly close below 70.

WTI oil futures were sold dramatically on Wednesday, extending their weekly losses to a more than a four-month low of 69.10.

The bears are leading for the seventh consecutive week, increasing speculation that a bullish correction could soon take place as the RSI and the stochastic oscillators are looking for an upside reversal near their oversold levels. Moreover, the market action is developing below the lower Bollinger band, suggesting that the latest downfall might be overdone.

It’s worthy to note that the market is currently testing the critical 200-period simple moving average (SMA) in the weekly chart at 70. The line paused the downtrend from 14-year highs in March and prevented a negative outlook revision in 2023. Hence, sellers might stay patient until a clear close below that threshold is achieved.

Meanwhile, in the daily timeframe, the price is struggling to crawl back above 70. If downside pressures dominate, the slide could halt immediately around the falling line from September at 68.20. The extension of the descending line drawn from the 2022 top could also block the bears around the important March-June 2023 floor of 66.95. Should the bear run continue, all the attention will turn to the 2023 base of 64.20 ahead of the 2021 floor of 62.00.

In the bullish scenario, where the recovery stretches above 70.00, buyers might drive towards the 72.60-73.75 constraining region. The ascending line from the October 2020 low is adding some credence to the area, while slightly higher, the bulls will need to climb above the 20-day SMA and the upward-sloping line from April 2020 at 75.70 to gain direct access to the 200-day SMA at 77.75.

All in all, WTI oil futures are looking oversold near a major support area after an aggressive decline. A continuation below 70 could add more fuel to the bearish wave.