Oil Price Forecast – Oil on Track for First Weekly Advance in Seven WeeksOil moves higher as it works to move out of an evolving bottoming trend reversal pattern. Several indications improve the likelihood of an upside breakout.
As the coronavirus outbreak continues to spread the risk to global oil demand rises. To what degree and when it might happen, is where there is confusion and uncertainty. Forecasters do not agree, and the target keeps changing as the virus spreads.
Price is Telling
Nevertheless, price does tell us something as it reflects the perception of millions of investors as to how the price of oil will be impacted. Although recent price action is still unclear, there are important levels that have been identified by the market over the past couple of weeks.
When a price level is broken, either up or down, it will tell us something about where oil is likely to head next.
Presently, crude oil is up 0.35 or 0.68% to $51.85.
Rising from Very Oversold Conditions
Regardless of the fundamental threat to global oil demand, there are several indications that the next direction may be higher in the near-term. At the same time, keep in mind that the trend remains down and a break below key support is bearish.
Oil became very oversold near the recent low of $49.30, based on the 14-day Relative Strength Index (RSI), which measures momentum. It was the most oversold since June 2019. The RSI has since been trending higher reflecting an underlying shift from sellers being in control to buyers starting to dominate.
First Weekly Gain in Six Weeks
If oil ends this week higher, that would be a change in the pattern of five weeks of lower prices, and therefore evidence for the bulls.
Next, watch for an added piece of bullish evidence if oil closes above last week’s high of $52.16, as it would change the recent bear trend pattern.
Double Bottom Trend Reversal
A possible double bottom pattern has formed over the past couple of weeks. This is a classic bullish trend reversal pattern, but only once it breaks out decisively. Until then it is more likely to fail, at least initially.
Watch for a move above the two-week high of $52.16 and then a daily close above that price level. So far today price moved above the high but quickly failed and pulled back into the range of the pattern. Therefore, a decisive move is needed and a daily close to confirm.
A daily close above $52.16 will also trigger a bullish reversal on the weekly chart, providing additional evidence for higher prices in oil.