Crude Oil – Quick Update
Verification of the breakout and its implications.
In today’s oil price forecast, I decided to share with you my insights from today’s Oil Trading Alert. Have a nice read!
Technical Picture of Crude Oil
In yesterday’s alert, you could read the following:
(…) the bulls completed the pro-growth scenario based on the reverse head and shoulders formation (marked with pink), which together with the red resistance zone (created by the Dec. high and the 78.6% Fibonacci retracement based on the entire Nov.22-Dec.6 downward move) and the current position of the 4-hour indicators (they remain in their overbought areas and are very close to generate sell signals, which together with the visible bearish divergences doesn’t bode well for further rally in the very short term) suggests that correction of the recent upward move could be just around the corner.
If this is the case and the price reverses and declines from the above-mentioned area, we’ll likely see a drop to the previously broken red declining line (based on the Nov.22 and Dec.4 peaks (the upper border of the black triangle marked on the daily chart) in the coming day(s).
From today’s point of view, we see that the situation developed in tune with yesterday’s assumptions and crude oil futures moved lower after the alert was posted.
Thanks to this decline, the price tested not only the above-mentioned support sine, but also slipped to the 38.2% Fibonacci retracement (based on the entire recent upward move). As you see, the combination of these supports encouraged the bulls to fight, which translated into a rebound and a daily closure above the upper border of the black triangle (marked on the daily chart below) and the barrier of $70.
These positive developments triggered further improvement before the U.S. market open, which resulted in another breakout above yesterday’s resistances and a fresh local peak.
Despite this price action, the pro-declining gap from Nov.25 lured oil bears to the trading floor once again, which resulted in a pullback. Taking the above into account and combining it with the bearish divergences between the price and 4-hour indicators, it seems that further deterioration (at least in the very short term) may be just around the corner.
If this is the case and the bears show their claws, we could see a test of the previously broken level of $70 or even a re-test of the upper border of the black triangle in the coming day(s).
If this key support withstands the selling pressure once again and the price rebounds from there, oil bulls will receive another verification of the earlier breakout above the triangle, which will likely translate into further improvement in the coming week.
Summing up, crude oil futures verified the earlier breakout above the upper border of the black triangle, which is a positive development that suggests further improvement in the short term. Nevertheless, considering the current situation in the 4-hour chart it seems that we could see another correction of the recent upward move first. Therefore, in my opinion, keeping an eye on the above-mentioned supports could be the key to further profitable trades. Stay tuned.
Have a profitable day, a wonderful weekend and see you on Monday.
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Anna Radomska