Crude Oil Price Outlook May Soon Turn Bullish Again
Crude Oil Technical Highlights:
- WTI crude oil is testing support not long after powerful weekly surge
- Once a low is in could see oil rally to mid-95s in fairly short order
December WTI crude oil futures surged by 16% the week before last, reminding the market how quickly oil can turn and burn. The pullback we are seeing is thus far orderly and smacks of a corrective sell-off and not a fading of the prior move.
The retracement has taken back about half the up-move from the September low, and with that it has brought into play support that held for much of the summer. The area immediately around 84.50 is a solid one.
The past couple of sessions we have seen December crude (CLZ) holding this level, but in the absence of a strong push off support the test has yet been confirmed. On the shorter-term time-frame there is a pattern developing that could change that.
Price action over the past few days is taking on a descending wedge which could trigger at any time. A clean hourly breakout above 85.53, followed by a daily close above that level should get things rolling higher.
The first level to watch as resistance is at 88.52, then the 200-day MA at 89.23. There is an unproven trend-line running lower off the highs that lies in the 90-area, but may not provide a problem. The next big swing level is high of the weekly surge at 92.42. The big level that I think could come into play on the next up-move is around 95.
If we see support fail here, then it will be important for oil to quickly find a low. The next level could come in around 80.49, but will be a rather deep retracement to come back from, and thus will take the shine off the current set-up.
Crude Oil (CL1!) Daily Chart
Crude Oil (CL1!) Hourly Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.