Crude Oil Price Forecast: Bullish Breakout Triggers Counter-Trend Rally

Crude oil triggered a one-day bullish reversal on Thursday as it broke out above Wednesday’s high of 68.32, which was an inside day. Demand is picking up following a successful test of support in an area of Fibonacci confluence from 65.45 to 65.31. That price zone was tested as support with this week’s low of 65.65.

Today’s advance signals a counter-trend rally within a declining trend and it follows the breakdown from a large symmetrical triangle consolidation pattern last week. The breakdown is new, and this is the first counter-trend rally since it was triggered. Therefore, once the counter-trend rally is complete, by finding strong resistance that turns price back down, the expectation is for crude oil to continue to fall.

Reaches Four-Day High

Today’s advance has already taken the price of crude to a four-day high, and it is set to close strong, in the top third of the day’s trading range. A stronger close is indicated above the four-day high of 69.52. At the time of this writing, it is trading above that price level. Crude looks to be heading to the 38.2% Fibonacci retracement level at 70.65 next, which is also near the five-day high of 70.71.

50% Retracement Lies at Bottom of Triangle

A test of resistance near the bottom of the triangle begins around the 50% retracement and prior swing low at 72.19 to 72.24, respectively. That starts a price zone to watch for resistance going up to the 61.8% Fibonacci retracement level at 73.74. Included within that price zone is the 20-Day MA, now at 72.98, and two trendlines that cross at the 61.8% retracement level.

Also, notice that a dotted vertical line has been added to the chart at the crossover of the lines. Until then, trendline resistance would be represented by the uptrend line at the boundary of the triangle. Subsequently, the downtrend line takes precedence after the vertical line.

Eventual Test of Support at Long-term Downtrend Line

Following the breakdown of the symmetrical triangle pattern crude oil is on track to retest support around the long-term downtrend line. It has been trading above the line for most of the past 33 months, so it represents a significant potential support area.

There are a couple indicators pointing to possible support around the line from 63.67 to 63.30. A prior swing low from May 2023 is at 63.67, and a target from the falling ABCD pattern (purple) extended by the 141.4% ratio shows at 63.30. These price levels can be used as a guide as the price represented by the line won’t be determined until the line is approached.

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