Crude Oil Price Forecast: Consolidates as Range Narrows Forming Symmetrical Triangle

Crude oil continued to consolidate on Thursday between two trendlines that define a developing symmetrical triangle type consolidation pattern. The top internal trendline was tested as resistance today with the day’s high of 77.90 and it held. That high was also a successful test of resistance of the 200-Day MA (blue) as it was relatively close and follows Monday and Tuesday’s highs, which were each above the 200-Day line. The 200-Day MA is currently at 78.15. The high today also continues a series of lower swing highs that are marked by the declining trendline.

Fractal Nature of the Market

The developing small symmetrical triangle is a fractal of the larger pattern in crude. For over six months crude oil has been forming a large symmetrical triangle consolidation formation. Currently, the smaller triangle looks like it may test lower support levels before crude is ready to break out of that formation.

The lower trendline of the pattern also defines the low end of the larger symmetrical triangle. It is the closer price area that has larger implications if broken to the downside. An upside breakout through the internal downtrend line keeps crude inside the larger pattern and heading towards the top line of resistance of that pattern.

Long-term Crude Oil is Trending Up

An eventual breakout of the larger symmetrical triangle, either up or down, should see crude start to trend again. There is strong support that has defined the lower portion of the large triangle formation. Starting with the swing low in May 2023, support has been tracked by the 50-Month MA. It has been successfully tested as support numerous times since May 2023, including this month.

Although on some months crude traded below the 50-Month line, it closed above the line every month. It has not closed below the 50-Month line since January 2021. This is bullish behavior on the monthly chart. Further, the 50-Month MA crossed above the 200-Month MA in June and continues to trend higher. Meanwhile, for each of the past three months, crude has recognized support of the 200-Month MA and mostly traded above it.

Remains Above Long-term Downtrend Line

Further, the swing low in May 2023 found support around the long-term downtrend line that starts from the peak in 2008. The lower boundary line of the large symmetrical triangle starts there. Subsequently, the large symmetrical triangle that has been forming is also above support of the long-term downtrend line and the 50-Month MA. Given these long-term bullish indications it seems more likely that crude oil eventually breaks out and up from the triangle. However, a decisive drop below 72.24 gives a bearish signal and is likely to lead to lower prices.

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