Oil Technical Analysis Signals Potential Further Price Retreat

(Bloomberg) -- Key technicals point to West Texas Intermediate crude futures extending its decline.

The so-called Directional Movement Index (DMI) entered negative territory Wednesday for the first time since August, which may indicate a further price drop is looming and is seen as a sell signal by investors. The U.S. benchmark that was in an uptrend, posting five consecutive months of gains through the end of January, has tumbled more than 5 percent so far this month.

Simultaneously, another key indicator, the Average Directional Index (ADX), used to measure the strength or weakness of a trend, remains close to 40. A value over 25 indicates the existence of a trend, while a value over 40 indicates a strong trend. The white line in the chart that earlier indicated the peaks becoming higher and higher, as crude gained momentum, is now retreating. With the recent pull-back in prices, the strength of the uptrend has weakened.

--With assistance from Kenneth Sexton Karishma Motwani and Marina Girgis

To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net.

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Debarati Roy, Mike Jeffers

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