Crude Oil Price Forecast: Consolidation Evolves to Form Bullish Wedge

Crude oil further consolidated on Thursday, establishing a narrow range inside day for the second day in a row. Activity was muted given the Thanksgiving holiday in the U.S. In the short term, the narrow price range that largely found resistance just below the 20-Day MA, could be followed by a sharp move in either direction.

Today’s high at 69.51 and the low of 68.49 provide the immediate price levels to key off. A breakout through the top heads towards a test of resistance at the 20-Day MA, now at 69.89, while a breakdown could test recent lows at 66.33 or 66.86.

Declining Consolidation Range

Crude oil remains within a consolidation range that is shown as a red box on the chart. The high of the range is 73.27 and the low at 66.86. However, a lower swing low was established on Monday, and by itself it indicates weakening demand. Since it follows a lower swing low from November 18, it established a declining consolidation pattern.

Also, notice that the 72.79 swing high from last week found resistance around the 50-Day MA (orange), which is angled down. The bearish relationship seen this week with the 20-Day line, relative to the 50-Day line, shows increasing downward pressure. Therefore, the two moving averages, plus the internal downtrend line that connects with last week’s high, followed by last week’s high, will provide important clues.

Potentially Bullish Wedge Established

A breakdown below today’s low, followed by a decline below this week’s swing low at 68.28, will keep trading in crude oil aligned with the larger evolving bearish consolidation pattern. Keep in mind that a breakdown from a large symmetrical triangle pattern triggered in early-September, and trading continues below the pattern. Nevertheless, there is another developing pattern to be aware of contained within the red consolidation box.

There is a potentially bullish declining wedge that has formed since the new lower swing high was established. It is valid currently but there will likely be further consolidation within the confines of the pattern for a while longer. What it does do is provide a quicker indication for an upside breakout than what was previously indicated, as a breakout is triggered on a move above the top wedge line.

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