Crude Oil Price Forecast: Breakout Above 200-Day MA Likely

Following two sharp rallies in the past two days, crude oil consolidates and trades inside day on Tuesday. It has been trading roughly between resistance around the 200-Day MA (blue) and support near the 20-Day MA (purple). At the time of this writing, the high of the day was 78.58 and the low 76.46. Nevertheless, crude is primed to breakout above the 200-Day line and trendline with a rally above Monday’s high of 78.73.

Double Bottom Test of Support

Crude oil looks to have completed a second bottom with last week’s swing low of 72.71. Notice that it generated a higher swing low relative to the prior low at 72.24 in early-August. Each low also successfully tested support around the lower rising trendline that makes up the boundary of a large symmetrical triangle formation. Given the two bullish reversals from the bottom triangle line it is now likely that crude rises to test resistance of the triangle, which would be at the top boundary line. This doesn’t mean it will be reached, just that the chance it will has improved.

Upper Trendline Now a Target

There is a rising ABCD pattern shown on the chart in purple with an initial target of 81.96. That is where the rising CD leg of the pattern matches the price appreciation seen in the first AB leg up. Notice that the target is also around the top downtrend line. The prior advance from the early-August low retraced a little over 61.8% before hitting resistance at 80.33 (B) and falling.

That high was also around the 50-Day MA (orange), now at 79.35. Therefore, a rally above this week’s high of 78.73 is a bull breakout of both a trendline and the 200-Day MA. Resistance may first be encountered around the 50-Day MA and a breakout above that line will provide an additional sign of strength, improving the chance for crude to head towards the August swing high.

Support at 76.17 Needs to Hold

Nonetheless, the bearish correction may not be complete and a deeper pullback below today’s low of 76.46 may yet occur. The 20-Day MA is at 76.49 and Monday’s low was 76.17. Therefore, a drop below 76.17 will signal a bearish continuation of today’s weakness.

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