By Marcy Nicholson
NEW YORK (Reuters) - The oil market's roller-coaster ride this year is not over yet, technical analysts warned on Friday, with new lows likely to come after traders catch their breath.
U.S. oil futures for March
While almost no one expects this to mark the start of an extended recovery amid a persistent global supply glut and worries over the Chinese economy, many are asking whether this is finally the end of an 18-month slide.
For some of the analysts it had the hallmarks of a classic dead-cat bounce, a natural pause in the tailspin that had sucked prices below $30 a barrel for the first time since 2003 - with still lower lows lurking in the weeks ahead.
"I don't think we've found a bottom yet," said Fawad Razaqzada, technical analyst for Forex.com and City Index in London. He does not expect prices to extend their recovery to above $35 a barrel, the level needed to prevent a further slide. U.S. crude closed at $32.19 on Friday, up 9 percent.
"For me, there's been no clear technical or fundamental signal that prices have not bottomed out. This is a mere oversold recovery, therefore I think prices will fall back again."
Walter Zimmermann, vice president and chief technical analyst at brokerage ICAP in Jersey City, also expected prices to fall to new lows although he noted that the charts were not decisively bearish.
"It may be a dying cat bounce but it has a little too much vim and vigor to be a dead cat bounce," Zimmermann said. He put key resistance at $34.65 a barrel.
"That doesn't mean it's not a bear market correction."
He pointed to weekly candlestick charts that show a potentially bullish signal called a "hammer bottom," with the latest week opening and closing near its highs following a week that closed well below its starting point.
If the market falls below $26.19, however, the next critical support level will be critical support ranging from $25-$21, he said.
Some recalled similar price action in August, when bearish traders piled on short positions for weeks before abruptly reversing course, sending oil up more than 25 percent in three days. Prices then traded sideways for several months before resuming their decline to new lows.
"This is basically an oversold bounce and typically when those happen, we retrace back to the midpoint of the previous area," said Peter Ruud, technical analyst at Informa Global Markets in New York, referring to the $33.54 level.
"It's not a bear market rally. It's more a potential set-up for basing. I think we're going to form some sort of double bottom base."
(Reporting by Marcy Nicholson; Editing by Marguerita Choy)