Crude Oil Price Forecast: Bullish Signals Emerge Amid Flag Formation

Crude oil has slowly been showing improving bullish signs recently as it continues to consolidate around the 20-Day (purple and 50-Day (orange) MAs. It began an upside breakout from consolidation on December 11 and has largely stayed above the line since. Notice that support around the trendline has been tested on multiple days following the bull breakout, and each day since has ended above the line.

In fact, a small bull flag trend continuation pattern has been generated and it is shown on the chart with two small parallel lines. It becomes interesting given its bullish position within the larger pattern and the fact that the consolidation phase followed a sharp one-day rally on December 11. That rally created a pole for the overall flag pattern.

Small Bull Flag Pattern

Of course, this is not the perfect flag pattern given that it is established within a larger consolidation pattern and that it is relatively small. Nonetheless, it can provide clues as to what might happen next. As noted, the flag has formed around support of the falling trendline, which is bullish behavior. In addition, it is around support of the 20-Day MA, which crossed above the trendline only yesterday, and it has also turned back up slightly. This is also bullish behavior.

On Tuesday, today, crude strengthened within the flag pattern as it rose above the highs of the prior two days. And it closed at its second highest closing price within the flag formation, as well as above the 50-Day MA for only the second time since November 22. Since the initial breakout of consolidation on December 11 has failed to follow through to the upside, maybe it will happen following a breakout of the flag.

Bull Breakout Above 71.41

A decisive rise above the top of the flag at 71.41 triggers a bullish breakout that should see momentum improve enough to easily bust through the prior interim swing high at 71.79 and possibly the November 7 swing high at 73.27. Higher targets include the 61.8% Fibonacci retracement at 74.42 and the 78.6% retracement at 76.47. Also to be considered as potential resistance are the two boundary lines from a large symmetrical triangle and the 200-Day MA at 76.23.

Support Needs to Hold Above 68.82

The above bullish outlook begins to change on a drop below the bottom of the flag at 68.82. That would put the nearby lower boundary line of consolidation that starts from the September trend low of 65.65, at risk of being broken.

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