WTI Crude Oil Forecast: Rally Tests $110 Resistance Zone

Resistance Zone Near $110

WTI crude oil extended its advance to a new high of $106.84 on Tuesday, as it approached the next potential resistance zone from around $107.47 to $109.74. That range begins at the 78.6% Fibonacci retracement of the prior decline and ends at the lower swing high of $109.74 from May. It also includes the 127.2% Fibonacci projected measured move target at $108.44. Furthermore, the top of the zone is reinforced by the top boundary of a rising trend channel.

Rising Channel Shapes Rally

A burst in bullish momentum was anticipated following the breakout two weeks ago above the top falling trendline of the falling channel that defined the parameters of recent bearish correction. Since a well-defined falling channel formed during that correction, the new developing rising channel parameters may be respected as well. This adds to the potential for resistance to be seen near the upper boundary of the rising channel.

Measured Move Targets Remain Higher

Despite the next potential resistance zone, the sharp six-day rally of approximately 75.9% in March suggests a measured move target for the current advance, beginning from the July low, near $119. It is not unusual for crude oil to swing harmonically, validating the reaction near target zones. The completion of the next pullback could establish the next low before another leg up toward that higher target zone. Initial support would be near the prior high of $99.29 and $94.38, while the midline of the rising channel can also provide a guide.

One thing that recent price action does validate is the continuation of volatility in crude oil. At the same time, there is structure to the price movement. The next reaction against the resistance zone should be telling. Do buyers retain control toward the top of the range near $109.74, or does selling pressure keep that from happening, resulting in the beginning of a pullback?