The RSI on the WTI-Brent spread is at a level associated with an impending rally, says James Dima, technical analyst at Marex Spectron.
Looking at a Chart of the December 2018 WTI-Brent spread (Z18), Dima points out that the RSI (lower pane) is below 20, an oversold level that is extremely rare. Based on similar periods that have occurred before, he argues this condition should not exist for much longer. The last time it happened was on 31 October 2017 when the RSI stayed below 20 for 3 days before yielding a 1.56 point maximum profitable move. The time before that was in 2014 when the RSI spent over 9 days below 20 before the spead rallied over 8.50 points over the following year.
Dima concedes that the spread can get more oversold in the coming days. However, he thinks such oversold levels should not last much longer and it may present a buying opportunity over the next few days.