Crude Oil Price Forecast: Heading Towards Possible Resistance at 61.8% Fibonacci Level

Crude oil remained on track to test potential resistance around the 61.8% Fibonacci retracement level at 82.10. Today’s high was 81.91 and trading continues near the highs of the day at the time of this writing. The 82.10 level can be combined with 82.26, which is where two trendlines cross.

A daily close above 82.26 will put crude back above the original and lower downtrend line thereby signaling a breakout. It remains to be seen whether demand can stay strong enough after that to continue the rally to the next higher target zone around 83.25.

Momentum Has Remained Strong

Momentum has been strong since the rally from the June 4 low began. Greater confidence was indicated recently given the continued strength seen after this week’s breakout above both the 200-Day and 50-Day MAs. Crude is on track to end the week strong, in the upper quarter of the week’s trading range.

Where it closes out the week relative to the 82.10 – 82.26 resistance zone will provide a clue as to whether bullish momentum can be sustained into the next week. On the longer time frame weekly chart crude triggered a bullish reversal this week. A strong close this week would indicate that it may have at least one more week to go for the rally before a retracement or consolidation period begins.

Watch for New Signs of Strength

A daily close above the initial downtrend line improves the chance of exceeding the higher and redrawn downtrend line encompassing the most recent swing high at 87.90. Also, a daily close above the top line increases the possibility of eventually exceeding the 87.90 swing high. Furthermore, a breakout of the top line triggers a breakout of a large symmetrical triangle consolidation pattern. The pattern is defined by two lines on the top and bottom boundaries that are pointed towards each other and eventually cross. Volatility has contracted during the formation of the consolidation pattern thereby preparing the market to see an increase in volatility.

In the short term we’ve seen that with the current rally, there is an increase in volatility. The rally has been relatively fast with momentum largely retained much of the way. Another scenario following a break above the higher downtrend line is that crude stalls its ascent soon thereafter and stays relatively strong by consolidating above what will be then then support of the downtrend line.

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