Another day, another gap, and the next bulls’ targets.
In today’s crude oil price forecast, I decided to share with you my insights from Monday’s Oil Trading Alert. Have a nice read!
Technical Picture of Crude Oil
Let’s start today’s Oil Trading Alert with the quotes from Friday’s edition:
(…) crude oil futures climbed to the above-mentioned next resistance zone (marked with the red ellipse with 2 on the chart) during yesterday’s session.
Thanks to this move a big white candle appeared on the chart, which successfully broke above the resistance area that stopped the buyers in the previous month. This show of the bulls’ strength translated into another higher open and the third in a row green gap ($73.71-$73.94) was formed, which triggered further improvement in the following hours.
As a result, oil bulls pushed the price above the mentioned second resistance zone, which means that the outcome of today’s session will indicate the direction of the next move.
What do I mean by that?
If the bulls manage to hold gained levels and the futures finish today’s session above the second resistance zone, the way to (at least) the next resistance area (created by the 61.8% Fibonacci retracement [based on the entire Jul.-Sept. downward move], the 78.6% Fibonacci retracement [based on the mid-Aug.-early-Sept. downward move]) will be open (marked with the red ellipse with 3 on the chart).
From today’s point of view, we see that the situation developed in accordance with the pro-growth scenario and the bulls approached the mentioned target earlier today.
As you see on the daily chart, crude oil futures opened the day with a small pro-declining gap, which triggered further deterioration and a test of the previously broken upper border of the pink declining trend channel and the green supportive gap from Friday ($73.71-$73.94).
This support area withstood the selling pressure, which translated into further improvement and a climb to an intraday high of $76.47 (in other words, the futures verified the earlier breakout above the pink channel).
What can we expect next?
Taking all the above into account and combining it with the buy signals generated by the daily indicators (although they climbed to their overbought areas there are no sell signals that could encourage the bears to show their claws), it seems that further improvement and attack on the next resistance area (created by the red gap ($77.20-$77.42) from Aug.27 is still likely.
Nevertheless, considering the 4-hour chart, we can see some technical details that are worth keeping in mind at the current levels.
What do I mean by that?
Let’s take a look below.
From this perspective, we see that crude oil futures are currently trading in a quite sharp green rising wedge, which suggests that a potential breakdown under the lower border of the formation, could translate into a correction of the earlier quick move – especially when we factor in the current position of the 4-hour indicators (the Stochastic Oscillator generated a sell signal and there is a strong bearish divergence between the CCI and the price).
Nevertheless, please keep in mind that as long as the price is trading inside the rising wedge further improvement and a re-test of the 4th resistance zone can’t be ruled out.
Summing up, crude oil broke above important resistances, which opened the way to the north. Nevertheless, the current position of the 4-hour indicators and the above-mentioned quite sharp green rising wedge suggests that keeping an eye on the borders of the formation could be the key to further profitable trades and indicate the direction of the next (at least) very short-term move.
If you’d like to receive similar - more extensive analysis on black gold (the full version of my analysis includes trading details and my premium subscribers are updated regarding the trading details on a daily basis), I encourage you to subscribe to Oil Trading Alerts.
And if you’re not yet on our free mailing list, I strongly encourage you to join it - you’ll stay up to date with our free analyses that will still put you ahead of 99% of investors that don’t have access to this information. Join our free oil newsletter today.
Anna Radomska