Crude Oil Price Forecast: Triangle and Wedge Patterns Point to Crude Oil Breakout

Volatility in crude oil continues to diminish as price compresses further as reflected in a tightening trading range over the past couple of months. On Tuesday, crude gained before finding resistance around the 20-Day MA. The high for the day was 69.15 at the time of this writing, and the 20-Day line is currently at 68.97. Notice that resistance was seen around the purple 20-Day MA today and the prior three days. This is a sign of weakening demand, although occurring within a larger consolidation range.

20-Day MA Remains a Short-term Pivot

There are also three recent upswings (red arrow) where crude oil exceeded the 20-Day line. That could still happen with the current attempt to strengthen, but until it does the 20-Day line is a key short-term upside pivot. In other words, the 20-Day line has been reflecting short-term resistance. This is bearish behavior unless there is a decisive and sustained advance above the 20-Day MA pivot, followed by a daily close above it.

Symmetrical Triangle Pattern

The bottom boundary line that represents support for a small symmetrical triangle pattern was confirmed again recently as support. The price of crude was rejected to the upside from the line last Friday and again yesterday. This is a notification that the line is valid and may represent support in the future. Although a breakout above the 20-Day line may trigger, crude will remain within the triangle formation until it rises above the top line of the triangle, which is purple.

Bull Wedge Pattern

There is also a recent interim swing high at 70.68 that may provide a more useful pivot, not only because it further confirms the triangle breakout, but it also gives a trend reversal signal. In addition, the 50-Day MA pivot currently marks the same price area. The top line is purple because it also represents a boundary for a possible falling bull wedge pattern. A purple line also marks the lower boundary (green arrows) of the pattern. Therefore, an upside breakout of the top line for the triangle also provides an initial breakout signal for a bull wedge.

Resolution on the Horizon

Volatility could increase soon if the triangle pattern proves valid as the apex is on January 3. This suggests that a spike in volatility, represented by a breakout of the patterns, either up or down, before the end of the year. Let’s see what happens.

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