Crude Oil Price Forecast: Triangle Compression Near Breakout Zone

Consolidation at Key Support Structure

Crude oil has been consolidating near trend highs and has formed a symmetrical triangle formation, leaning on support near the 50-day moving average and 50% retracement of the prior advance. That indicator was successfully tested as support on Thursday with the session’s low of $99.54. An overall upward bias is indicated if crude oil stays above that dynamic trend indicator. The two prior declines found support near that average. Although there were brief dips below it, each session closed above the 50-day line, validating its significance. Currently, the 50-day average is near $99.70 and rising.

Spot WTI crude oil daily chart shows tightening range

Short-Term Pressure Meets Trend Support

On Thursday, the price of crude oil remained under pressure following Wednesday’s large range bearish reversal. But the 50-day moving average represents an area of support that should hold if crude oil is to have a chance of breakout of consolidation to the upside. That looks to be the most likely scenario currently.

Spot WTI crude oil weekly chart shows upside target if bull trend continues

Volatility Compression Near Apex

Two factors increase the chance the volatility is likely to expand soon, or the triangle formation may evolve into another pattern. The triangle narrowing is one and a successful test of support at the 50-day average is another. Symmetrical triangle patterns typically see a breakout through one of the two boundary lines when price is approximately 50%-75% of the distance from the pattern’s base to its apex. The apex is shown near June 4. Since crude oil remains in a clear uptrend with dynamic support near the 50-day average, the reaction near that average will be key to what comes next.

Breakout Levels and Measured Move Projection

An upside breakout of the triangle is first indicated above the top boundary line, with increased confidence above the lower swing high of $109.74. That is followed by another lower swing high at $113.43. A measured move of the pattern projects to $144.52. Following a successful breakout the new higher swing low becomes key support. That could be Thursday’s low of $99.54.

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