Crude oil’s bounce from recent lows continues, but resistance at the 20-Day line and 200-Day MA levels could determine whether the rally extends or stalls.
Crude oil rallied into resistance at the 20-Day MA on Tuesday as it reached an 11-day high of $69.45. Also, Tuesday’s advance reclaimed the 200-Day MA, now at $68.86. That is a sign of strength that signals that higher prices are likely. But it needs to be confirmed by a daily close above the 200-day line.
Also, Monday’s high is at $68.89 and a daily close above that level will confirm a one-day breakout and bullish continuation of the uptrend bounce that began from the June 24 swing low at $65.02. Support around that low was confirmed by an AVWAP line begun from the April trend low. In other words, it measures from a significant long-term low.
A higher swing low was established with Monday’s low of $66.12. Bullish momentum was represented by Monday’s bullish engulfing pattern. That followed strong bullish momentum seen in a full green candle from the upside breakout of a small pennant consolidation pattern that triggered last Wednesday. Together, these signs show demand improving for crude oil.
Notice that the general minimum potential Fibonacci retracement of 38.2% at $70.14 has not yet been reached. Once a reclaim of the 200-Day MA is confirmed, higher targets become more likely to be tested. From the 50% retracement at $72.73 to a prior swing high at $72.49 marks the next higher potential target zone. And if the 50% level can be reclaimed with a daily close above it, an advance to the 61.8% Fibonacci retracement at $73.31 could be next.
Given Monday’s higher swing low, a small rising ABCD pattern has been added to the chart. Interestingly, an initial target at $69.45 was completed today, right on the button. However, a projected 127.2% ABCD pattern target is at $70.36. Since it is close to the 38.2% Fibonacci level, the two price levels can be considered as a potential resistance zone from $70.14 to $70.36.
Despite the potential for higher prices, today’s high resistance could hold and lead to downward pressure. Since resistance at today’s high was confirmed by both the 20-Day MA and 100% target for the ABCD pattern, that could be the end of the bounce. Where crude oil closes relative to the 200-Day MA should provide a clue as a close below it will be a weaker sign than a daily close above it.
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With over 20 years of experience in financial markets, Bruce is a seasoned finance MBA and CMT® charter holder. Having worked as head of trading strategy at hedge funds and a corporate advisor for trading firms, Bruce shares his expertise in futures to retail investors, providing actionable insights through both technical and fundamental analyses.