Crude Oil Price Forecast: Bounces Toward Key Resistance After Recent Low

Crude oil showed strength on Thursday as it dipped briefly below Wednesday’s low earlier in the session before buyers took back control. Since Thursday’s low at $57.93, crude oil has advanced and continues to trade near the highs of the day, at the time of this writing. Currently, today’s high was $60.24. Crude is set to end the day at its highest daily closing price in seven days.

That is a minor bullish sign for the short-term outlook and increases the chance that a bounce off the second bottom in crude oil at $55.81 may have more upside to go. Certainly, a test of resistance around the 20-Day MA, now at $61.13, seems most likely.

Dynamic Resistance at 20-Day MA

Since the sharp drop on April 3, the 20-Day MA has defined dynamic resistance of the near-term downtrend. Recently, the 20-Day line was tested as resistance twice during an initial counter-trend rally and it was followed by an accelerated decline. A second counter trend rally began from Monday’s low of $55.81 and looks like it is poised to reach the 20-Day line at a minimum.

Given the recent history resistance is expected to be seen once first approached. But if strength in the price of crude oil can be maintained there is a chance of an upside breakout. A rally above the 20-Day line would show strength but a confirmed breakout would need a daily close above that line.

Lower Swing Low Established

Monday’s low established a higher swing low, and it was accompanied by a higher swing low in the relative strength index (RSI). Nonetheless, crude oil is rising inside a bear trend on multiple time frames. Whether it can continue to rise depends on the behavior around key potential resistance levels. The first being the 20-Day MA. After that, there are several minor price levels of interest until last week’s high of $64.06, which was a lower weekly high.

Short Term Bullish

The developing weekly pattern in crude oil is bullish and may reflect downside exhaustion. Bullish behavior was also seen in the weekly candle at the prior bottom of $55.23 in early April. Regardless, a period a consolidation is also a possibility as overall volatility could begin to diminish if crude oil continues to test the lows as support and it stays below the 20-Day MA.

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