Crude Oil Price Forecast: Pullback Sets Stage for Potential Upside Continuation

Crude oil triggered an initial breakout of consolidation last week, reaching an interim swing high of 71.41 before pulling back. Subsequently, Tuesday led to a deeper bearish pullback and a test of support around the 20-Day MA with the day’s low of 69.22. The drop to the 20-Day line took crude back below the downtrend line (purple) that marks the top of consolidation.

However, at the time of this writing it looks like there is a good chance today’s close will be above the line. That would indicate that it now represents support, which would be bullish. Nonetheless, further signs of strength are needed to continue to support that thesis.

Finds Support at 20-Day Line

Notice that today’s pullback to the 20-Day line was the first test of a previous resistance area since last week’s bullish breakout. The 20-Day line was reclaimed on the same day the consolidation breakout triggered. Since a new lower swing high has been generated as of today, that high at 69.98 can be watched as a potential pivot.

A little further up is a more significant upswing high at 71.79. If crude can get above and stay above that price level, higher prices become more likely. Previous resistance shows around the 70.19 to 73.27 highs, which corresponds to the 50% retracement at 72.97.

Consolidation Breakout Could Trigger Momentum Spike

However, since a breakout of consolidation triggered there is the potential for a more aggressive move higher given the compression of the price range over recent months. In that case the 61.8% Fibonacci retracement is at 74.42 followed the 78.6% retracement at 76.47.

Also, notice that the lower boundary line of a large symmetrical triangle pattern cuts through the area between the two price levels. It also represents potential resistance. It will be interesting to see how crude oil relates to the line given that it represents the triangle.

Downward Pressure Remains

Overall, crude remains in a downtrend. The more significant swing low of the price structure of the trend is at the swing high of 73.27 from early-October. If that price level is exceeded, then a bullish long-term reversal is indicated and an upside breakout through the triangle would have also been triggered. Regardless of current technical indications, patterns evolve or fail if they don’t follow through on the initial distinction.

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