Crude Oil Price Forecast: Rebounds After Hitting $71.22 Support Level

Crude oil deepened its bearish retracement to a new pullback low of $71.22 on Tuesday before buyers took control, which led to a rally. Rather than closing lower for the day it looks like the intraday recovery may lead to a gain for the day. Tuesday will likely end with a relatively one day bullish candlestick pattern.

Intraday Rebound Recovers Key Levels

The drop to a new retracement low of $71.22 earlier in Tuesday’s session triggered a breakdown below the 50-Day MA at $75.23. This is generally bearish, but the intraday recovery reclaimed the 50-Day line, which is a bullish sign. Sellers had the chance to take it lower and they couldn’t do it. In other words, there was a failed breakout through a pivot level. Failed breakouts can provide signals for the opposite direction.

Whether that bullish indication continues remains to be seen. But it does show the market recognizing the 50-Day line. Therefore, it becomes a key short-term pivot level that should show signs of support if tested again. Moreover, if crude falls back below the 50-Day line and stays below it, that would be a short-term bearish sign.

Watch and Wait?

In addition to the failure of support at the 50-Day MA, the 61.8% Fibonacci retracement at $72.32 was also exceeded to the downside. Therefore, today’s potentially bullish behavior may not result in further strength, and the correction could continue. As noted above, the first sign of further weakness would be a drop below 50-Day MA. Today’s low price would then provide the next key lower pivot level, and if that low fails as support, the 78.6% retracement is down at $70.03. It would become the next lower target. A couple more days of price history should help provide other price levels.

Upside Breakout Above $73.93

On the upside, a breakout above today’s high of $73.93 shows strength. But crude oil would be heading up into a resistance zone starting with the nearby internal trendline. There was a five-day consolidation range during the recent decline following a drop below the 200-Day MA, currently at $74.95. The area around the 200-Day MA could show some resistance on the way up, as well as the 20-Day MA.

A little above the 200-Day line is the 20-Day MA at $75.95. That looks like the next more significant upside pivot since it was tested as resistance during intraday volatility on Monday. Notice that Monday’s high of $75.82 saw resistance a little below the 20-Day MA.

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