Short-Term Reversal at Key Moving Averages
Crude oil pulled back on Thursday after it reached a bounce high of $99.21 during Wednesday’s session. Resistance was seen at the 20-day moving average and near the area of the 50-day moving average. Given a one-day bearish reversal that triggered on Thursday, prior dynamic support indicated by each of those moving averages has been reconfirmed as resistance. However, the 50-day moving average is more significant given its history of marking support during the recent advance that began in early March.
Compression Within a Symmetrical Triangle
This suggests further downward pressure in the price of crude oil in the near-term, or the potential for a strong breakout above the 50-day moving average. Nonetheless, both the potential upside and downside moves may be constrained since crude oil is trading within a symmetrical triangle consolidation pattern. The top falling boundary line defines potential resistance of the pattern, with support indicated by the lower rising boundary line. They go along with structure levels, including a lower swing high of $109.74 for resistance and a higher swing low for support. Although a break of a boundary line may provide a signal, the related swing level provides a more reliable signal and confirmation.
Rising Support Converges With 100-Day Average
The lower boundary line of the triangle is soon to be joined by the rising 100-day moving average at $86.18. It represents another lower target zone that sits just below the lower triangle boundary. It adds to the potential for strong support in the region. Also, once the 100-day average begins to cross above the lower line, the potential for an eventual upside breakout increases as support will be further confirmed near the lower boundary of the triangle.
Breakout Targets from Pattern Structure
Measured moves estimated from the triangle pattern point to two potential upside targets following a successful breakout. The first is $144.57, which matches the height of the pattern defined by a percentage change in price, while the second objective is based on the change in price and points to $147.28.
Coiling Structure Ahead of Next Impulse
Overall, crude oil remains in a technically compressed consolidation phase, where momentum is coiling within the triangle structure, and the next decisive move is likely to emerge once either top boundary line or lower boundary is broken.