Crude Oil Price Forecast: Counter-Trend Bounce Meets Downside Risk

Counter-Trend Bounce Tests Immediate Resistance

Crude oil triggered a one-day bullish reversal on Tuesday and subsequently rallied, before reaching a three-day high of $94.43 and testing resistance near the 10-day moving average. This counter-trend bounce is to be expected given the short-term bearish price structure. Whether it turns into something more than that remains to be seen. Given the close alignment of the 20-day moving average with trendline support during the recent rally, it seems likely that it may also be tested as support before last week’s low of $81.94 is tested again. This sets up a broader tension between short-term rebound strength and the prevailing downside structure.

Breakdown Structure Defines Key Support Zone

A breakdown of the 20-day moving average was triggered decisively on April 8, along with a break below the 10-day moving average and the uptrend line. There was the first pullback that tested resistance near the uptrend line before a continuation of the decline occurred to last week’s low. That was a successful test of support near the 50-day moving average, which is now at $85.85. It currently aligns closely with a swing low from March at $85.50. This confluence reinforces the importance of the $85.50 – $85.85 zone as a key structural pivot area.

Recovery Path Hinges on Reclaiming Resistance

Given the potential significance of bouncing off the 50-day average price zone, and Tuesday’s reversal signal, an advance to test resistance near the 20-day moving average may develop. Currently, the 20-day average is $97.86 and not too far from the 50% retracement level of the recent downswing at $98.73. If the minor lower swing high at $95.35 is recovered, that higher price zone becomes the next upside target zone. In this context, the recovery path remains intact but conditional on sustained momentum above short-term resistance levels.

Downside Scenario Targets Deeper Retracement

If resistance persists at the 20-day average, then another leg down could occur. Although the 50-day moving average shows solid support, the more significant moving average target is at the 100-day moving average at $72.78. A test of that lower zone would almost put crude oil back near its recent breakout above a long-term downtrend line and top boundary of a large falling wedge.