Crude Oil Price Forecast: Nears Key Levels Amid Tightening Price Patterns

Crude oil established a new lower swing low on Thursday as it dipped below Wednesday’s low to reach a low of 68.12 for the day. Therefore, yesterday’s high of 70.68 is a new lower swing low (red arrows). Notice that Wednesday’s high found resistance around the 50-Day MA and a top downtrend line (purple) as the two lines have converged.

The top purple line looks like it either marks dynamic resistance of a developing falling bull wedge pattern or the top of a small symmetrical triangle (blue lines) formation. Either way, a decisive move through either of the boundary lines around current consolidation could lead to a clear increase in volatility.

Two Patterns of Consolidation

One thing that both patterns indicate, the small symmetrical triangle and falling wedge, is that the price range in crude has been compressing recently. When that happens, it can typically lead to a sharp move in the direction of the breakout. However, for crude oil a drop though the bottom of the small triangle boundary line, at approximately 67.22 as of today, may keep it within the confines of the wedge boundary.

That could dampen initial downside volatility. Nevertheless, a decisive drop through the 66.86 swing low from November 18 indicates a bearish breakout of the small triangle pattern. Then, the prior swing low from September at 65.65 becomes the next lower target.

Breakdown Targets 65.65

The September swing low was the lowest traded price for crude since May 2023. It ended the initial breakdown from a large symmetrical triangle consolidation pattern that triggered in early-September. Recent consolidation is largely contained under the bottom boundary line of the large triangle. That is a bearish position, particularly given the failed attempt to rally through the triangle range that occurred following the 65.65 swing low. Regardless,

Upside Bull Move Above 70.67

Regardless of the supporting bearish evidence, there is a bullish wedge present in the chart for crude. An upside breakout would first be triggered on a rally above the top purple boundary line of the pattern, while a more reliable signal is indicated on a rally above this week’s high of 70.67. Also, keep an eye on the 50-Day MA pivot since it is very close to the weekly high.

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