Crude Oil Price Forecast: Battle at $59.00 Resistance Intensifies

Current Price Action and Breakout Trigger

Crude oil strengthened on Tuesday as a further reaction to Friday’s sharp selloff. An upside breakout above Monday’s inside day high of $58.40 triggered, with a higher daily low of $57.71 established along with a higher high of $58.58. Minor signs of strengthening were indicated on Friday and Monday as support was successfully tested near the 10-day moving average, which was reclaimed a week ago Monday. A daily close above Monday’s high will confirm the one-day breakout.

Path to the 50-Day Average

Since the first pullback following the 10-day recovery shows prior resistance becoming support, buyers may again attempt to recover the 50-day average. That average has been an area of resistance since it broke in early August. Most recently, last week’s lower swing high of $59.00 encountered resistance near the 50-day average. For bullish sentiment to improve, crude oil needs to rise above and then close above that swing high, as well as the 50-day line, now at $59.14. Crude oil remains in a clear downtrend and short-term strength is just that unless the $59.00 swing high is taken out.

It is interesting to note the coming convergence of the 50-day average with an internal downtrend line (dashed) that looks like it starts tomorrow. Thereafter, the 50-day will represent a higher dynamic resistance zone than represented by the trendline. That would be the first time that the 50-day line had crossed above the internal downtrend line and would be a minor sign of improving underlying demand.

Importance of the $59.00 Swing High

Friday’s daily low of $56.77 presents key short-term support. Given signs of strength near the 10-day average, that low may evolve into a higher swing low, which is the first pullback after a bull breakout of a four-day bottom range six trading days ago. However, an inverted doji hammer candle pattern completed last week inside the larger bearish trend structure.

The period closed in a weak position in the lower quarter of the week’s range. It is a reminder that the bears dominate price action. A counter-trend advance into last week’s range does not clarify a shift in control, and therefore resistance is expected to turn price back down, unless there is a sustained upside breakout above $59.00.

Key Short-Term Support

Short-term support is at Monday’s low of $57.08. If that level fails to hold as support, then the bearish inverted hammer weekly pattern shows support at $56.77, with a weekly breakdown on a drop below there.

Summary

In summary, Friday’s low of $56.77 and high of $59.00 mark key near-term price levels for crude oil. A breakout in either direction is needed before the situation in crude oil is clarified.

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