Crude Oil Price Forecast: Shows Strength as it Heads Towards Top of Triangle

Crude oil completed a 38.2% Fibonacci retracement on Thursday with the day’s high of 76.99. This follows a retracement low of 72.24 from Monday, which was also successfully tested as support the following two days. A bullish breakout triggered yesterday above 75.13 and today’s advance furthered the rally.

Top of Triangle Now a Target

Strength seen this week may be the beginning of an advance that leads to a test of resistance at the top trendline of a large symmetrical triangle pattern that has been forming in crude oil for over eight months. This week’s low found support at a low of 72.24 thereby completing a 78.6% Fibonacci retracement. Also, support was seen at the lower boundary line of the triangle. Once the bottom of a consolidation pattern is reached, there is the potential to swing back to the other side of the pattern. In this case, the downtrend line at the top of the triangle.

Monthly Chart is Bullish

Although a symmetrical triangle can break out in either direction, up or down, there is reason to believe that the triangle in crude may resolve to the upside. The monthly chart (not shown) tells the story. There is a long-term downtrend line drawn from the July 2008 high of 147.08. That line represented resistance until a sustainable bullish breakout occurred in December 2021.

The line was successfully tested as support over multiple months beginning around November 2022. That area represents the bottom of the triangle, which is at 63.67. It turns out that the 50-Month MA was also tested as support around the same time. And the 50-Day line has continued to indicate an area of support on the monthly chart since then.

Lower Volatility Leads to Higher Volatility

Volatility in crude oil has declined as the triangle pattern has evolved. Given the nature of the pattern volatility, with two boundary lines angled towards each other, crude may continue to decline as the boundaries of the pattern move closer together. However, this low volatility environment is setting the stage for a potential large move.

It could come as a precursor to a breakout or following it. A bull breakout above the top trendline will have already triggered once the most recent swing high of 84.74 is broken to the upside. That will confirm that triangle breakout with an earlier signal given on a move above the line. The price represented by the line will depend on when the line is reached, and if it is reached.

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