Realization of the scenario, important candlestick formation and levels to watch.
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
Let’s start today’s analysis by quoting the Oil Trading Alert posted on Dec.12, 2024:
The first thing that caught my eye on the daily chart was yesterday’s breakout, not only above the barrier of $70 but also above the upper border of the black triangle.
What does it mean for crude oil futures?
(…) Considering the height of the above-mentioned formation, it seems that oil bulls could go even to around $74.83 (…)
From today’s point of view, we see that the situation developed in accordance with the previous pro-growth scenario and the bulls reached the mentioned target during yesterday’s session.
Thanks to this price action buyers also approached the lower border of the orange gap from Oct. 14, but didn’t manage to attack this important resistance, which translated into a reversal and pullback.
Monday’s decline took the futures below the previously broken second resistance zone (created by the upper border of the orange gap and the 61.8% Fibonacci retracement), invalidating the earlier breakout.
This negative development resulted in a lower Tuesday’s open (Asian trading hours), which formed a small gap ($73.38-$73.56).
Did this price action trigger further deterioration?
Nope.
Why?
I believe that the best answer to this question will be the 4-hour chart below.
From this perspective, we see that the futures approached the previously broken upper border of the black very short-term rising channel, which encouraged the bulls to fight for higher prices in the following hours.
Thanks to their mobilization the price came back above the upper border of the green rising channel, invalidating yesterday’s breakdown under this important support line. Although this is a positive sign, we should keep in mind that yesterday’s price action left on the 4-hour chart a pro-declining candlestick formation – the bearish engulfing pattern.
What does it mean for the bulls?
Taking into account the realization of the pro-growth scenario, the proximity to the next resistance zone (created by the orange gap from mid-Oct. [$75.05-$75.56] and the 78.6% Fibonacci retracement and marked with the red ellipse on the daily chart) and the above-mentioned candlestick formation, it seems that even if the buyers manage to go higher later in the day, the space for gins may be limited – especially when we factor in the sell signal generated by the daily Stochastic Oscillator and the current position of the CCI.
Therefore, in my opinion, as long as the mentioned key resistance zone remain in the cards another attempts to move lower should not surprise us in the coming week (even if the bulls use the buy signal generated by the 4-hour Stochastic Oscillator and invalidation of the earlier breakdown under the upper border of the green rising trend channel to test the strength of the nearest resistances first).
At this point it is worth noting that if the bulls do not manage to close today’s session above the green channel and the 61.8% Fibonacci retracement oil bears will gain additional reasons to act. That’s why I believe that keeping an eye on this important support/resistance line could give us valuable clues about the next (at least) very short-term move.
What could happen if the oil bulls disappoint?
If the buyers let their opponents to finish the day under the upper line of the green channel, we’ll likely see a test of the previously broken upper border of the black rising channel, which is the last stop before the next support zone created by the previously broken Nov.7 intraday high and the Jan.3 low (around $72.70-$73.13).
Summing up, crude oil futures closed Friday’s session not only above the 61.8% Fibonacci retracement, but also 13 cents above the upper border of the orange gap from mid-Oct. This positive development translated into further improvement on Monday and resulted in a realization of the pro-growth scenario from Dec.12, 2024. This price action lured the sellers to the trading floor and crude oil futures dropped under the previously broken levels, creating a pro-declining bearish engulfing pattern on the 4-hour chart. Additionally, both daily indicators remain in their overbought areas (while the Stochastic Oscillator generated a sell signal), suggesting that the space for gains may be limited and bigger correction in the following days should not surprise us – especially if the bulls do not manage to neutralize the bearish candlestick formation. Therefore, in my opinion, keeping an eye on the above-mentioned key resistances and the upper border of the green rising channel could give us valuable clues about the next (at least) very short-term move.
Have a profitable day and see you tomorrow.
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Anna Radomska