Crude Oil Price Forecast: Reverses at Key Resistance, Forms Bearish Pattern

Crude oil rallied to a high of 84.64 on Tuesday before sellers took back control and turned it back down. That high completed a 78.6% Fibonacci retracement and a 11.91 point or 16.4% rally from the trend low at 72.73. Further, resistance around the higher downtrend line was successfully tested as resistance as well as crude reversed lower shortly after.

Subsequently, crude is on track to close weak, in the lower quarter of the day’s trading range, and with a bearish red shooting star candlestick pattern. Today is the first sign of weakness. So, a continuation lower is the most likely path before buyers return to take another attempt at a bullish trendline breakout. Therefore, crude remains within a large symmetrical triangle price formation.

Test of Trendline Support

Support was seen today at a low of 82.98, close the 83.02 resistance from Friday. That low completed a test of support at the lower internal uptrend line. Over the coming few days the 83.02 to 82.98 rough price zone can be used as a proxy for potential support around the line. The top of a small expanding triangle may provide another price area where support is seen. Other possible support areas to watching during a pullback include this week’s low of 81.69, followed by the prior swing high of 81.00 from late-May.

Completed 16.4% Advance

Crude just had a healthy aggressive rally that stopped and reversed right on target (downtrend line/78.5% Fibonacci level) It shouldn’t be surprising that momentum has reversed to the downside. Profit taking has become more aggressive as the target is relatively obvious.

If crude had instead continued above the downtrend line, the further it went the greater the chance for a sharper correction. The developing pullback should eventually provide a more reliable launching pad for another attempt at an upside breakout. The second breakout may have a better chance of seeing a sustained advance above the downtrend line.

Monthly Bullish Reversal Triggers

Finally, the monthly chart (not shown) confirms a bullish move. A bullish monthly reversal was triggered yesterday as crude rallied above last month’s high of 83.02 and then closed above it on a daily basis. Since the longer-term time provides the more dominant pattern, crude has a good chance of again breaking out of the symmetrical triangle pattern with another rally and daily close above the downtrend line.

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