Crude Oil Price Forecast: Eyes Breakout Momentum Amid Key Resistance Levels

Crude oil advanced to a high of 70.76 on Thursday thereby successfully testing resistance at the 50-Day MA. That is where it hit resistance, and it was followed by a minor pullback. Of interest, is a successful test of support of the 20-Day MA with the day’s low of 69.21. This was a minor sign of improving demand as four out of the prior five days hit resistance at the 20-Day line. Now that it reflects support, the chance for further strengthening increases.

Breakout Above 70.76

Of course, the next bullish signal will be on an advance above today’s high, and that would also trigger a breakout above the 50-Day line. Moreover, the possible beginning of an upside breakout of a bullish falling wedge pattern (purple lines) triggered yesterday with a rise above and daily close above the top boundary line of the pattern.

Typically, this pattern can see sharp moves once a breakout triggers. This is the second day of a breakout of the top boundary line of the pattern. The initial breakout day yesterday confirmed the advance with a daily close above the line and in the top quarter of the day’s wide range green candle.

First Upside Target

An initial upside target from the pattern, assuming new signs of strength if the beginning of the pattern, is at 73.27. It coincides with a 50% retracement level at 72.97. Further up is a 61.8% Fibonacci retracement level at 74.42. Then, if crude can keep rising it heads towards a 78.6% retracement at 76.47. On the way up notice the two trendlines. One falling and marking the top boundary of a large symmetrical triangle pattern, and the other rising across the lower boundary of the pattern. Either line could represent resistance on the way up and a sign of strength if exceeded.

Narrowing Range Prepares for Spike in Volatility

Since the price of crude oil has been compressing over the past several months, with a narrowing price range, it has the potential to see a spike in volatility following a confirmed breakout. For the moment, it looks like the most likely direction would be higher. However, a drop below the recent swing low of 67.11 could change that outlook to bearish.

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