Crude Oil Price Forecast: Bearish Pressure Meets Key Support

Sideways Consolidation Within Downtrend Pressure

Crude oil continued its short-term sideways price action on Tuesday, as it further tested support near the 78.6% Fibonacci retracement at $68.81. A corrective low of $69.48 was reached on Friday, following a break below the 200-day moving average last Tuesday. Since that long-term trend indicator failed as support, downside pressure has continued to dominate price action.

Multi-Layer Support Zone Under Test

Nonetheless, crude oil looks likely to further test a support zone that begins near the 78.6% retracement at $68.81 and extends down to a prior minor resistance zone from January near $66.57. Within that zone is a long-term downtrend line that marked the top boundary of a large falling wedge pattern with a high of $131.31 from March 2022.

Falling Wedge Breakout Retest Dynamics

Last week’s low put crude oil back near the initial upside breakout area for the large falling bullish wedge pattern that triggered in early March, leading to a sharp advance to a multi-year high of $119.54. Once that price zone is tested as resistance the potential for a completion of the bearish correction rises. Although there is always the possibility of a deeper retracement, below $66.57, to the 88.6% Fibonacci retracement at $62.36, there is also a reasonable chance that a sustained bottom is generated within or above that price range.

Volatility Expansion and Recovery Targets

Given the spike in volatility seen following the wedge breakout, another sharp advance seems possible once a bottom is confirmed and signs of strength return. Initial upside targets are located near the breakdown zone for a recent symmetrical triangle formation. Previous support and now potential resistance lie near a minor swing low of $88.90. A little higher is the falling 50-day moving average near $92.78. That average is about to cross below the lower boundary line of the triangle, which would add to its potential as an upside target.

Reclaim Levels for Trend Recovery Confirmation

Nonetheless, in order to test prior support as resistance from the symmetrical triangle pattern, the 200-day moving average near $74.75 would need to be reclaimed, followed by a rise above the 20-day moving average, now near $81.48.

Support Zone Defines Next Phase

Overall, while crude oil remains under pressure following the breakdown below the 200-day moving average, price action is now approaching a key multi-layer support zone where a potential base could form, setting the stage for the next directional move once exhaustion or reversal signals emerge.

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