Crude Oil Price Forecast: Rally Nears Resistance with Potential for Bearish Decline Afterwards

Crude oil continued its advance on Thursday into a potential resistance zone around the bottom of a large symmetrical triangle pattern. The day’s high of 72.82 tested resistance around the August 21 interim swing low. A breakdown from the triangle triggered on September 3, and the current advance is a counter-trend rally of the related decline. Today’s rally recaptured the 20-Day MA at 71.99 and crude is on track to close above the line today. Crude had been below the 20-Day line since August 30.

Triangle Breakdown Implications Dominate

Nevertheless, the larger pattern dominates. The 50% retracement level at 72.19 begins a potential resistance zone up to the area around the 61.8% Fibonacci retracement at 73.74. It is joined by a rising trendline at the bottom boundary of the triangle formation. And an internal downtrend line is also not far away. The rising boundary line has represented support since December 2023. It can be expected to reflect resistance since crude fell below the line two weeks ago.

Retest of Recent Lows Possible Once Bearish Reversal Indicated

Once resistance is encountered that is strong enough to turn the price of crude oil back down, it will likely retest the recent low of 65.65 and may continue lower. Below the recent swing low is important support around the long-term downtrend line. Crude has largely traded above the line since December 2021. A prior swing low at 68.49 along with an extended ABCD pattern target at 63.30 can be used as a proxy for the line, for now.

Notice that the May 2023 low is significant in that it marks the lowest traded price for crude oil since December 2021. Therefore, a breakdown below that price level will indicate a continuation of the bear trend that began from the March 2022 peak as a lower swing low will be created.

Bearish Crossover of Moving Averages

In addition to the breakdown of the triangle pattern, the overall bearish outlook for crude oil was confirmed by the recent crossover of the 50-Day MA dropping below the 200-Day MA. The 50-Day line had been above the 200-Day line since April 11. Following the current bounce the bearish outlook remains as the breakdown only just began. It won’t hit the initial target from the symmetrical triangle until around 43.66. The point being that the potential for lower prices remains following the current short-term counter-trend rally.

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