Crude Oil Price Update – Bullish Chart Pattern, Trade Talk News Could Trigger Massive Upside Breakout

U.S. West Texas Intermediate crude oil futures finished higher on Wednesday, but off its high following the release of an industry report that surprised traders with an unexpected inventory build. Throughout the session, prices were supported by a survey that showed activity in China’s services sector expanded at the fastest pace in three months in August as new orders rose.

On Wednesday, October WTI crude oil finished at $56.26, up $2.32 or +4.30%.

Although the market opened lower on Thursday, the early loss could be recovered quickly because of breaking potentially bullish news.

China’s Ministry of Commerce said Thursday that the leaders of the U.S. and Chinese trade talks held a phone call in the morning and agreed to meet in early October for another round of negotiations.

In other news, late Wednesday at 20:30 GMT, the American Petroleum Institute (API) reported that U.S. crude stocks rose the week-ending August 30, while gasoline inventories decreased and distillate stocks drew down. Crude inventories rose by 401,000 barrels, compared with analysts’ expectations for a decrease of 2.5 million barrels.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through $56.89 will change the main trend to up. The main downtrend will resume on a move through $52.84.

The main range is $60.93 to $50.50. Its retracement zone at $55.72 to $56.95 is resistance, but also the trigger point for a potential acceleration to the upside.

The short-term range is $50.50 to $57.40. Its retracement zone at $53.95 to $53.14 is support.

Daily Technical Forecast

Based on the early price action on Thursday, the direction of the October WTI crude oil market the rest of the session is likely to be determined by trader reaction to the main 50% level at $55.72.

Bullish Scenario

A sustained move over $55.72 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to extend into the main top at $56.89.

Taking out $56.89 with conviction will change the main trend to up. Overcoming the Fibonacci level at $56.95 will indicate the buying is getting stronger. This could create the momentum needed to take out main tops at $57.13 and $57.40.

The main top at $57.40 is a potential trigger point for an acceleration into the next main top at $58.86.

Bearish Scenario

A sustained move under $55.72 will be a sign of weakness. The daily chart is wide open to the downside under this level with the next support area $53.95 to $53.14.

Overview

The news about the scheduling of trade talks between the U.S. and China was strong enough to offset the bearish API report.

Watch the price action and read the order flow on a test of $56.89. Taking out this top could trigger the start of a huge breakout to the upside.