Crude Oil Price Forecast: Breaks Resistance and Retains Strength

Crude oil further tested resistance on Tuesday around the top boundary line of a large symmetrical triangle formation and the most recent swing high at 79.09. An upside breakout of that line triggered yesterday on the way to a new trend high of 79.38. Strength was then confirmed by a daily close above the line.

Today’s price action is likely to complete an inside day that was largely expressed above support of the line. It could be surmised that a daily close below the line is a little weaker than a close above it, but the trendline is only one guide and horizontal price levels can generally be more reliable as guides to supply and demand.

Gone Too Far, Too Fast?

Certainly, there is an argument to be made that the rally in crude oil has gone to far too fast and that it is extended and due for a price correction. The relative strength indicator (RSI) momentum oscillator has turned down following its highest overbought reading since the April peak last year. Nonetheless, there remain signs of short-term strength that could lead to a test of the next higher target at 80.30 before a bearish correction. That price completes a measured move as marked with rising purple arrows.

Drop Below 77.51 is Bearish

A decisive drop below today’s low of 77.51 shows weakness that could lead to a decline below Monday’s low of 77.30. A test of support around the 200-Day MA, currently at 75.61, would not be surprising at that point. Also, watch the prior high of 75.47 along with the 200-Day line.

Given the sharp advance recently in crude oil, a pullback or consolidation could be coming at any time. Potential support around the 20-Day MA is way down at 72.60. The fact that the price of crude is so far above the 20-Day line is another factor weighing on the possibility of higher prices in the near-term.

Watch 200-Day MA

A pullback to test support around the 200-Day line or another significant prior resistance area could help set the stage for a continuation of the developing bull run. Possibly, the advance continues following a relatively short rest as recent price action shows strong demand.

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