Crude Oil Price Forecast: Drops Further into Consolidation Range

Crude oil attempted to break out of a consolidation bottom on Wednesday with a new 20-day high of 81.00, a whole number. Resistance was quickly encountered off that high leading to a weak close yesterday, and a bearish continuation today, Thursday. Tuesday triggered an upside breakout above the 200-Day MA and downtrend line. Each was a sign of strength. However, upside follow through never happened and instead sellers took back control.

Broadening Formation Continues to Form

So, there is a potential bottom or bearish continuation broadening formation that has formed. It can breakout in either direction. Purple lines mark the boundary of the pattern, and they point away from each other. It is a consolidation pattern where volatility expands over time rather than contracts. Each line was already established from prior price action, and the top line provided a short-term upside target. Therefore, the lower line is a potential target for the pullback that is just starting. The current low of the pattern is 76.60 and support represented by the lower declining boundary line is slightly lower.

Since the advance earlier in the week could not hold onto gains following an attempt to breakout above key resistance lines, the downtrend remains dominant. That would include both the near-term downtrend as well as the longer downtrend that began from the March 2022 peak. Nonetheless, a 61.8% Fibonacci retracement completes at 75.49 for the downside.

Bottom Boundary Line Support Target

For a bullish scenario, support should be seen either before 76.60, around it, or near the lower boundary line. Aggressive traders will likely look to enter off that lower line if crude falls that far. The 200-Day MA is at 80.15 and presents a benchmark level to watch on the upside. However, be aware that crude oil is more recently within a large symmetrical triangle consolidation type pattern as the price range narrows. This means the 200-Day MA trending indicator is not as reliable as it would be in a more trending environment. But, in this case it has converged with the long-term downtrend line and can be used from that perspective, as a key pivot.

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