Crude Oil Price Forecast: Pullback Tests Uptrend Support

Pullback Finds Support at Rising 20-Day Average

Spot WTI crude oil bounced from support near the 20-day average on Tuesday. This suggests that a three-day pullback within a developing uptrend may have found a bottom at a low of $61.18. The retracement followed an 86-day high of $66.57 from last Thursday and completed a 61.8% Fibonacci retracement at $61.57. Both Monday’s and Tuesday’s daily lows successfully tested support near that retracement area.

Spot WTI crude oil shows recovery of 200-day average. Source: TradingView.

A daily close above $62.61 confirms the 200-day reclaim

Although the 200-day line failed as support initially, it was reclaimed during Tuesday’s bounce on a move above $62.61. A daily close above that average is needed to confirm the reclaim of the line and keep it as a trend support indicator. Also, the 10-day average at $62.62 was recovered. Note that the 10-day average is about to cross above the 200-day average, further indicating strength of the advance.

Spot crude oil weekly chart shows advance inside falling channel. Source: TradingView.

Trigger above $63.81 puts $67.02 and $71.33 in focus

A bullish one-day reversal from Tuesday’s potential higher swing low will trigger above Tuesday’s high of $63.81. Price structure and the strength shown by a sustained reclaim of the 200-day average point to an extension of the rally above the $66.57 high. A 127.2% Fibonacci projection for a rising ABCD pattern shows an immediate upside target at $67.02. Higher up is a 78.6% Fibonacci retracement of the decline that began from the July lower swing high at $71.33.

20-Day Average as Critical Near-Term Support

However, if the bearish retracement is not yet complete, support should be seen at or above the 20-day average, which would show buyers in charge. Currently, that average is $60.99 and rising. Since the average is rising, it may touch price within a day or two. That would satisfy a test of that line as support and could lead to an upside acceleration in momentum.

Inside Week Consolidation Sets Up Potential Breakout

Although crude oil is setting up for bullish continuation, it is currently on track to complete an inside week. Typically seen after a relatively sharp move, an inside-week consolidation pattern would establish a bullish setup with a lower trigger price than the current trend high (which would be this week’s high once completed). This seems likely to occur since there are only three days left for the week. To break out above last week’s high, crude oil would need strong upside follow-through from current levels.