Crude Oil Price Forecast: Rallies but Faces Resistance Near Key Levels

Crude oil rallied to a high of 72.05 on Tuesday before encountering resistance. The high may have completed a 50% retracement and test of resistance at the 20-Day MA. Notice that both indicators have started to converge. In addition, there is also a prior swing low at 72.24.

Together, these indicators represent a potential resistance zone from 72.19 to 72.23. Although that range wasn’t touched, today’s high was close and may be close enough. Watch the behavior of the next rally around this price zone for clues as to strength or potential weakness.

Counter-trend Rally to Test Prior Support as Resistance

A breakdown from a large symmetrical triangle triggered in crude oil on September 3. And it fell to a low of 65.65 before finding support last week and bouncing. The bounce is a counter-trend rally in a bearish trend. Therefore, resistance is expected to eventually turn the price of crude back down for a retest of the lows and possibly a drop lower. But the advance may not be over yet.

50% Retracement Almost Reached

Since the 65.65 low crude has rallied to test resistance around the 50% retracement. There has only been one leg up so far. Certainly, a pullback followed by a continuation of the advance is possible. If that occurs, higher price targets are around the bottom of the symmetrical triangle pattern.

There is an interim swing low at 72.4 and the 61.8% Fibonacci retracement completes at 73.74. Also, be aware of the two trendlines. If crude continues to strengthen, one of those lines may mark resistance, depending on which is reached. One line is rising, and one is falling. Notice that a horizontal dotted line on the chart marks the intersection of the trendlines.

Possible Retest of Recent Lows to Come

A rally above and subsequent daily close above the 61.8% retracement is needed for signs that crude may continue to strengthen beyond there. If the recent low of 65.65 is retested it looks reasonable that a lower target may be reached before the decline is completed, for the moment.

The lower target is around support of the long-term downtrend line. It includes the line plus a prior swing low and falling ABCD pattern extended by the 141.4% ratio (square root of 2). Together, they create a potential support zone from 63.67 to 63.30. Given the long-term nature of the trendline, it represents the more significant price levels. Crude has mostly been above the downtrend line since December 2021.

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