Crude Oil Price Forecast: Consolidates with Potential for Upside Breakout

Crude oil remains stuck in a tight consolidation range formed near recent trend highs. It crept a little higher today to reach a new trend high of 82.46 before pulling back. The consolidation range takes the form of an expanding triangle where the two boundary lines of the pattern are pointed away from each other. As the pattern develops the price range expands slowly to new highs and new lows but fails to follow through.

This makes the pattern a little more challenging to navigate as there will be false breakouts, both up and down. Today, is one example where a new trend high was triggered but quickly encountered resistance that turned price back down. The bottom of the pattern is at yesterday’s low of 80.50, which was a false breakdown below the earlier low of 80.59.

Stuck in Expanding Triangle Consolidation

It is possible that trading continues to evolve the expanding triangle with trading contained within the boundary of the pattern. Last week crude encountered potentially significant resistance zone anchored by the 61.8% Fibonacci retracement at 82.10 and the convergence of two trendlines. Both an uptrend and downtrend lines converge around the same price area. Given the clear stall out that has occurred, the market has recognized the resistance zone. The fact that the retracement to date has been minor and resistance continues to be tested, as seen today, is reflecting underlying strength in demand for crude.

Pushing Up Against Key Pivot Zone

Notice that the downtrend line is the original line drawn prior to the false bull breakout on April 4. It is clearly being respected by the market, so it remains on the chart. However, the new upper trend resistance is at the top trendline connecting the April 12 swing high.

Since crude continues to challenge resistance following an aggressive advance of 13.2% from the June 4 swing low, it seems reasonable to anticipate a potential upside breakout once the consolidation phase is complete. Although bullish momentum has died over the past week, a weekly bullish trend continuation signal did trigger on Tuesday and then again today. Therefore, as it looks now, traders will likely be buyers overall on weakness.

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