Crude Oil Price Forecast: Tests Support at $73.87 Amid Bearish Retracement

Crude oil continued its bearish retracement on Tuesday to find support at 73.87. The decline completed a 78.6% Fibonacci retracement and then bounced intraday. That low price may lead to a bullish reversal but so far there is no confirmation of it. There has been a bounce to the 74.62 area at the time of this writing.

Drop Below 73.87 Heads Lower

What we know is that support was seen from the day’s low. Therefore, a decisive drop below today’s low signals a continuation of the bearish retracement. That will put crude in a position to test support round the bottom rising trendline that provides the lower boundary for a large symmetrical triangle pattern. Also, the recent swing low of 72.24 is nearby and can be watched along with the line for signs of support.

Rise Above Today’s High is Bullish

On the upside, a breakout above today’s high of 75.72 provides a sign of strength and it may signal a bullish reversal and completion of the retracement. Follow-through will be key and provide additional clues to help answer that question. Given bullish signs on the monthly chart for crude the expectation is that support is seen somewhere above the 72.24 swing low, and that it is followed by a bullish reversal. However, the symmetrical triangle formation does not indicate direction and can breakout either way, up or down. The monthly time frame shows crude hugging support of the 50-Month MA for over a year and a successful test of the 200-Month MA as support more recently.

First Upside Target is 76.98

A bullish reversal off from today’s low has crude heading back up into potential resistance levels. Also, it has the potential to eventually test resistance at the top downtrend line, followed by a bullish breakout of the triangle. Nevertheless, on the way there the 20-Day line at 76.98 presents the first potential resistance barrier. A daily close above that price level is needed to indicate that demand in crude is strong enough to take it the distance to the top of the triangle.

New ABCD Pattern Points to 81.96

Added to the chart is a rising ABCD pattern with an upside target of 81.96. It assumes that today’s low (C) is a swing low. Notice that the target is joined by the 78.6% Fibonacci retracement at 82.07 and the long-term downtrend line, which is also the top boundary of a symmetrical triangle formation.

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