Crude Oil Price Forecast: Breakout Cycle Signals Further Upside

Momentum Builds Following Breakout Advance

Buyers retained control of crude oil on Thursday, reaching a new three-week high of $114.85. That followed the highest daily closing price for the larger advance three days ago and suggested a continuation of the near-term rally seen today. This keeps crude oil in a bullish position for a potential test of resistance near the $119.54 spike high from March, reinforcing the strength of the post-breakout advance introduced earlier.

Support Holds as Momentum Strengthens

A successful test of support at the 10-day moving average occurred earlier in Thursday’s session before the new high, reflecting its switch from resistance to support. This switch signals strengthening bullish momentum and reinforces the short-term uptrend. It also confirms that the 10-day average has taken over near-term dynamic support from the 20-day moving average, which has now converged with the uptrend line.

Nevertheless, another key Fibonacci retracement level, specifically the 88.6% retracement at $114.61, was tested today, where resistance has so far stalled the ascent. A breakout would confirm strength, while a pullback would be a normal and constructive development, potentially targeting either the 10-day moving average or the 20-day moving average support zones.

Bigger Picture: Cycle Structure in Focus

Given the continuing risk of price shocks, this might be a good time to review the larger technical picture in crude oil. The rally in February triggered an upside breakout of a large falling wedge formation, which preceded an advance of approximately 117% from the prior swing low. It is interesting to note the relationship between that upswing and the upswing prior to the 2022 peak of $131.31, which followed a 112% rally in the price of crude oil. Notably, that prior cycle unfolded in three distinct legs up from the 2020 bottom. The first saw roughly a 292% increase, the second a 112% increase, and the third a 112% increase, as noted above.

Continuation Potential Within Bullish Cycle

Crude oil has had only one leg up from the continuation breakout, suggesting there is at least a second leg up to come. Importantly, the first leg up was similar in price change to the shortest of the prior upswings. If that historical pattern provides a guide, a comparable follow-through move remains possible. In summary, this long-term analysis is supportive of higher prices and aligns with current bullish momentum observed following the recent breakout, pointing toward a potential eventual breakout above the 2022 peak and completing the broader cycle that began with the recent surge.

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