Crude Oil Price Forecast: Drops Below Key Support, Eyes Deeper Decline

Crude oil broke down from a large symmetrical triangle consolidation pattern on Tuesday as it fell below the lower boundary line of the pattern, as well as the recent swing low at 72.24. That swing low from early-August found support around the bottom line and now confirms a breakdown of the triangle. Selling has dominated today with crude set to close near the lows of the session with a wide range red candle. It continues to trade near the lows of the day at the time of this writing. Currently, the low for the day was 70.79.

Crude Falls Hard

Given the sustained drop today crude is well on its way to reaching the first lower interim target range from 69.58 to 69.46. The top price completes a large falling ABCD pattern that is labeled in purple on the chart, while the second level is the 127.2% Fibonacci extended retracement of the rally that began from the swing low in early-June. Given its large size, the ABCD pattern target could see an encouraging bounce back up into resistance. If so, the recent swing low of 72.24 and 72.71, along with the uptrend line at the bottom of the triangle, are potential resistance areas to watch.

Breakdown from Long-term 50-Month Moving Average

The breakdown from the lower trendline has significance as support of the large triangle, and because it was hit four times by the price of crude. More than two hits strengthen the significance of the line. Moreover, the monthly chart (not shown) provides further evidence for the significance of today’s breakdown.

Since the swing low in March 2023 the 50-Month MA has done a good job of identifying support. On that month and each subsequent month gold closed above the 50-Day line. That is until last month. August was the first month since March 2023 where crude closed below the 50-Month line. That now looks like an early indication of the bearishness we’re seeing today.

Triangle Points to 43.66

Since the triangle has triggered to the downside a measuring objective can be calculated to provide a potential minimum price target from the pattern. This doesn’t mean it will be reached, but it could be. The triangle indicates a potential lower target for crude oil at 43.66.

For a look at all of today’s economic events, check out our economic calendar.