Crude Oil Price Forecast: Reversal Day Signals Strength

It is starting to look like crude oil may have found a bottom today, Thursday, as it generates a reversal day. A new retracement low of 77.06 was hit today before signs of support. That low completed a retest of support around the 61.8% Fibonacci retracement level at 77.32. Subsequently, buyers took back control and ran crude up to exceed yesterday’s 72.29 high.

At the time of this writing, it continues to trade near the highs of the day. If it closes in the top third of the day’s trading range a bullish hammer candlestick pattern will be established. Moreover, today’s rise recaptured the 200-Day MA at 78.84, providing an additional sign of strength in demand.

Bullish Signal Above 79.45

A bullish signal will be triggered on a rally above today’s high of 79.45. If weakness comes first, it will likely be used by traders to enter or add to positions in anticipation of the potential rally. Support is clear at today’s low of 77.06. Of course, if that 77.06 low is broken to the downside the bullish scenario is negated for now.

There is also a potential bullish setup forming in the weekly chart (not shown). If crude can maintain strength heading into this week’s close, a weekly bullish hammer candlestick pattern will be formed. Subsequently, a weekly bullish breakout would be triggered above this week’s high, which is currently at 80.35.

Symmetrical Triangle Breakout Could Trigger Soon

Crude oil attempted to break out above its downtrend line in early-July and failed, leading to the current retracement. This means that today’s low is probably the low before another breakout attempt occurs. This time crude may be successful. The trendline marks the top boundary of a large symmetrical triangle consolidation pattern.

It means that an upside breakout above the trendline could see a clear improvement in volatility to the upside. During the consolidation phase volatility had declined and it is reflected in the narrowing overall price range as the triangle formed. A price of 83.69 can be used currently as a proxy for the line. It comes from the most recent swing high.

Rising ABCD Pattern Targets 86.50 Initially

Since it is likely that today’s low ends the retracement, a new rising ABCD pattern has been added to the chart. An initial target of 86.50 is identified from that pattern. However, that is a target that is very likely to be reached as the CD leg of the pattern is 78.6% of the AB leg, rather than the 100% that is used more frequently. The 100% target from the pattern is up at 89.07.

For a look at all of today’s economic events, check out our economic calendar.