Crude Oil Price Forecast: Poised for Rally

Crude oil may have reached a bottom on Monday with a new retracement low of 72.24. An intraday bounce followed, leaving a potentially bullish hammer candlestick pattern. Subsequently, an initial upside breakout was attempted today, Tuesday, as crude briefly exceeded Monday’s high of 75.07 before pulling back.

Crude is on track to close below Monday’s high and will not confirm strength of the breakout until there is a daily close higher than 75.07. Heading into Wednesday, today’s high of 75.13 along with the 75.07 high can be watched together for signs of strength.

This Week’s Low May End Bearish Correction

There is reason to believe that Monday’s low may end the bearish retracement and lead to a rally. The decline completed a 78.6% Fibonacci retracement, and it occurred near the lower boundary line of a large symmetrical triangle pattern. Resistance was seen at the top line of the triangle, at the most recent swing high in early-July. Once resistance is seen at the top line of a triangle, a decline to test support around the bottom line becomes a possibility. That turned out to be the case with crude.

Bullish Reversal Signal Above 75.07

A bullish reversal signal will first be indicated on a rally above Monday’s high and then on a move above today’s high. The first area to watch for signs of resistance above Monday’s high should be around the 38.2% Fibonacci retracement at 77.02. A more significant upside price target is then around 78.49. That is the 50% retracement level, and it is confirmed by the 200-Day MA at 78.39.

Higher up presents the 20-Day MA at 79.14, followed by the 61.8% Fibonacci retracement at 79.97. That price area is also marked by the 50-Day MA, which is currently at 79.60. A daily close above the most recent interim swing high of 79.67 would be needed to further confirm a bullish reversal of the retracement.

This week’s low may be the lowest traded price for crude prior to a bullish breakout of the symmetrical triangle formation. Therefore, demand should clearly improve if Monday’s high is exceeded. The chance for a bullish breakout increases as crude gets closer to the apex of the triangle.

Drop Below 72.24 Turns Outlook Bearish

The above bullish scenario changes if yesterday’s low of 72.24 is exceeded to the downside and the price of crude oil stays below that support area. After that the 88.6% Fibonacci retracement is at 70.11. A little lower is marked by two Fibonacci measurements suggesting potential support from 69.57 to 69.46.

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