Crude Oil Price Forecast: Rally Meets Resistance, Downside Risks Emerge

Crude oil completed a $10.08 or 18.3% rally from the recent $55.23 trend low as of Wednesday’s high of $65.32. Subsequently, sellers took control for the remainer of the day leading to a bearish engulfing pattern. That increases the risk that crude oil may weaken further before again challenging this week’s high. The initial advance on Tuesday found resistance around the 20-Day MA, now at $64.48. In addition, a prior long-term support zone and now potential resistance was also successfully tested. The range ranges from around $65.40 to $65.98.

Bearish Inside Day Forms

Today, Thursday, crude oil consolidated forming an inside day with a high of $63.73 and low at $62.40. There are a couple indications of weakness provided from the day. Notice that the day’s range is in the lower half of Wednesday’s range, and at the time of this writing, crude oil is trading below the halfway point of the range and looks likely to close in a similar relatively bearish position. Moreover, the high for the day found resistance at a significant price level from May 2023 (dashed horizontal). That was the lowest traded price for crude oil until the recent sharp fall.

Below $61.94 Points Lower

A decline below today’s low provides the next sign of weakening, while a deeper bearish retracement is signaled on a drop below Wednesday’s low of $61.94. Notice that there is also a small rising trend line across the bottom of recent price action. That line will already be broken if Wednesday’s low is triggered. If the decline is triggered there are two key areas to watch for support. The first is at a recent interim swing low of $60.40 and the 50% retracement at $60.27. Then, further down is a range from $59.08 to $58.86, defined by the 61.8% Fibonacci retracement and prior daily support, respectively.

Weak Weekly Close Looks Likely

There is one more day to the week with crude oil set to establish a second consecutive higher weekly high and higher weekly low. It reflects short term strength. But bearish price action following this week’s high puts crude oil in a position to end lower for the period and likely below last week’s high of $64.72. Therefore, the upside weekly breakout would not be confirmed on that time frame.

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