WTI crude oil continues to trend higher as it bounced off the ascending channel bottom and is breaking past the mid-channel area of interest. This could put it on track towards testing the very top of the channel at $55 per barrel. The 100 SMA crossed below the longer-term 200 SMA, though, indicating that the path of least resistance is to the downside. In other words, resistance is more likely to hold than to break. Then again, the moving averages might simply be oscillating to reflect consolidation action. Stochastic is turning lower to confirm that sellers are regaining control while buyers take a break. RSI is also heading down from the overbought region to signal a return in selling pressure and a possible dip to the channel bottom at $52 per barrel. However, it also looks like price broke past a small bullish pennant continuation signal to confirm that buyers are ready for another leg higher, possibly the same height as the mast. US sanctions on Venezuela due to its political troubles are being seen as the main factor that spurred the price bounce, and the latest API report on private stockpiles is adding more bullish pressure. The agency reported a crude oil inventory build of 2.098 million barrels for the week ending Jan 25, which is lower compared to analysts expectations of a build of 7.97 million barrels. This comes ahead of the EIA report which might also release a smaller than expected build, easing concerns of oversupply in the US. Keep in mind that the OPEC output deal is already in force, which adds further downside pressure on global supply. However, crude oil’s next moves might hinge on overall market sentiment resulting from the FOMC decision and the NFP report later this week. Indications that the Fed would slow down its pace of tightening could further stoke risk taking and crude oil gains.

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