Crude Oil Price Forecast: Bulls Trigger Weekly Reversal, Resistance Looms Ahead

Weekly Bullish Reversal Signals Short-Term Strength

Crude oil triggered a bullish reversal on the weekly chart this week, which also was a bullish hammer breakout. Support was seen following a slightly new long-term swing low at $55.00, before signs of support were seen. Buyers took back control within the week, enough to end the week in the top half of the period’s range. Since WTI futures are closed on Thursday for Christmas holiday, Friday looks set to confirm a breakout of a weekly bull hammer pattern with a weekly closing above last week’s high of $57.82.

Key Resistance Levels Loom Ahead

Although the one-week reversal pattern looks convincing, it puts crude oil on a direct path to test resistance at the confluence of the 10-week moving average at $59.26 and a 78.6% Fibonacci retracement at $59.37. The 50-day average on the daily chart is $59.13. Sellers overall continue to dominate the price of crude oil, as a clear downtrend price structure of lower swing highs and lower lows remains until the recent $60.56 swing high is surpassed with a daily close above it. That will trigger a trend reversal of the short-term decline that began following a sharp counter-trend rally from the prior swing low in October.

Daily Close Above 50-Day Average

An early sign that the possibility of a trend reversal is becoming more likely will first be indicated on a daily close above the 50-day average, now at $59.13. Additional signs of strength would then need to follow. A failed confirmed breakout of the 50-day line occurred at the December lower swing high, and it could happen again. Reclaiming the 10-week average will show strength, as it has not done a good job recently of defining dynamic resistance. It has short-term value given the confluence with the 78.6% retracement.

Support Levels Define Near-Term Outlook

Last week’s high of $57.82 and this week’s low of $56.93 are a couple of areas to see signs of support. This week’s low has greater significance as it is a higher weekly low. A sustained decline below it would be a clear bearish indication. Bullish reversals off current lows have led to several healthy rallies and could do so again. But until there is a daily close above the 50-day line, the expectation is for resistance to turn down the current counter-trend advance. If that is followed by a higher swing low, then the next leg up might have a better shot at triggering a trend reversal.

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