Crude Oil Price Forecast: Surges Past Swing High, Targets Fibonacci Levels

Crude oil continued to rally on Tuesday to reach a high of 72.27. Gains further confirmed strength from yesterday’s breakout of a small bull flag pattern. A prior lower swing high at 71.79 was exceeded today, after showing resistance yesterday with the day’s high. This provides another sign of strength in the process of a bullish reversal. Further, notice that the 20-Day MA (purple) is about to rise above the 50-Day MA (orange). Crude is on track to end the day in a strong position in the top third of the day’s trading range and above the 71.79 swing high.

First Target Zone Around 72.97

There are two initial upside target zones defined by the confluence of Fibonacci retracement levels and the initial, plus extended targets for a rising ABCD pattern (red) derived from the flag formation. The first target zone is from 72.97 to 73.12, and it includes the 50% retracement and 100% target for the ABCD pattern, respectively. Next up would be the 74.29 to 74.42 price area. That range starts with the 127.2% extended ABCD target and a 61.8% Fibonacci retracement level.

Demand Remains Despite Earlier Breakdown

The larger pattern unfolding that needs to be considered is the breakdown from a large symmetrical triangle pattern that triggered in early-September. Subsequent consolidation has largely been contained below resistance from the triangle formation as represented by the two boundary lines. By itself, that is a bearish clue and leads to the expectation that signs of resistance are likely before crude oil rallies above the top boundary line of the triangle.

Nevertheless, faster moves can follow failed breakouts, up or down. This, combined with the fact that there has been little bearish follow through following the drop from the triangle, along with recent bullish price action, leaves open the possibility of an eventual bullish reversal through the top line of the triangle and then above the 79.09 swing high from October.

If the 74.42 price level can be reclaimed, then the next higher price zone to watch begins around a 161.8% extended ABCD target at 75.78. That is in an area of confluence with other indicators, including the two lines of the triangle along with the 200-Day MA at 76.02, plus the 78.6% retracement at 76.47.

Bullish Weekly Signs

It is also bullish that this week has the potential to end with the highest weekly closing price for crude in 12 weeks. Plus, this week crude broke above the 20-Week MA at 71.15 and is likely to end the week above that price level.

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