Fresh local low, signals from the indicators and potential scenarios.
In today’s oil price forecast, I decided to share with you my insights from today’s Oil Trading Alert. Have a nice read!
Technical Picture of Crude Oil
In yesterday’s Oil Trading Alert, you could read the following:
(…) What can we expect next?
(…) taking into account yesterday’s sharp decline, which created a pro-declining bearish engulfing candlestick formation on the daily chart and today’s unsuccessful comeback above the barrier of $70, it seems that another attempt to move lower and a re-test of the strength of the mentioned green support zone can’t be ruled out – especially if the bulls do not manage to finish today’s session above the level of $70.
Looking at the above charts, we see that the situation developed in tune with the above scenario and crude oil futures turned south after yesterday’s alert was posted.
Thanks to Tuesday’s price action oil bears not only tested the mentioned support zone, but also slipped below it, testing the 61.8% retracement. In this way, the sellers also materialized the pro-declining scenario from Friday.
What do I mean by that?
When we take a look at the 4-hour chart, we see that crude oil futures broke below the lower border of the green rising wedge on Monday, which triggered a pro-bearish scenario assuming a decline to around $68.50, where the range of declines corresponded to the height of the formation (both ranges are marked with the blue rectangles).
Despite this drop, the bulls came back to the market and invalidated the earlier breakdown under mentioned supports, which translated into further improvement and a climb to the 38.2% Fibonacci retracement (based on the recent declines) before the U.S. market open.
At the same time the Stochastic Oscillator and the CCI generated buy signals, suggesting further improvement.
Will we see such price action?
In my opinion, it will be more likely and reliable if we see a successful breakout above the upper border of the orange consolidation (based on yesterday’s big black candle).
Therefore, if the bulls manage to push the price above $69.87 (and the 50% Fibonacci retracement), we’ll likely see further march north and a test of the Nov.22 peak of $71.50 or even a move to around $71.70, where the size of the rebound will correspond to the height of the orange consolidation.
However, before the bulls can celebrate at this level they will have to beat the previously broken barrier of $70, the 61.8% retracement (at around $70.20) and the resistance area based on the 78.6% Fibonacci retracement (at around $70.75) and the tiny gap (70.86-70.88) from Nov.25 (seen on the 4-hour chart).
Summing up, crude oil futures invalidated the earlier breakdown under the green support zone and the 61.8% Fibonacci retracement, which together with the buy signals generated by the indicators encouraged oil bulls to push the price higher. Although these are positive developments, we should keep in mind that the futures are currently trading inside the orange consolidation (marked on the 4-hour chart), which means that further rally will be more likely and reliable if we see a breakout above the upper line of the formation. Until this time short-lived moves in both directions should not surprise us.
Have a profitable day and a wonderful Holiday time!
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Anna Radomska