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WTI Crude Oil Price Forecast: Basing Pattern Favoring Higher Prices

WTI Crude Oil Price Forecast: Basing Pattern Favoring Higher Prices

2015-10-29 20:28:00
Tyler Yell, CMT, Currency Strategist
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Talking Points:

  • Crude Oil Technical Strategy: Setting Up For Breakout
  • Strong Move Higher Off Support Shows Medium-Term Upside
  • Next Big Test Likely at 200-DMA For Long-Term Directional Bias

WTI Crude Oil price continues to show signs of a technical base. A technical base happens over a period and precedes a move higher. From the beginning of the year, crude oil continues to find support or a price floor in the $43 per barrel to $47 per barrel zone. This pattern played out again after the Federal Reserve noted that, “at its next meeting,” economic conditions and data could encourage a rate hike. The validation for the Federal Reserve’s first rate hike since 2006is based on encouraging signs from the economy, which aligned with oils aggressive move off the lows before FOMC. This development aligns nicely with the bullish case that we recently said was aligning with a 2-month low in the Chicago Board Options Exchange Crude Oil Volatility Index.

The Daily crude oil price chart is showing impressive resilience against pushing below $43 per barrel (black horizontal line on chart). Through the sideways price action in September, price consistently bounced off of $43 per barrel region and did so again this week. If we continue to hold above the $43 per barrel price, the case for a retest of the 200-day moving average at $51 per barrel becomes increasingly strong. Additionally, the relative strength Index is bouncing off range lows that could mean we are more likely to see oil price push higher from the stalwart $43 per barrel mark.

Wednesday’s pushhigher in price aligned with an equally strong surge in volume. Currently, the upside is favored, and conditions for a break above the 200-day moving average is strong.Thankfully, WTI is highly correlated to other markets like the US Dollar and USD/CAD, which can help us look for strong directional bias. The clearest sign that a prolonged breakout in US Oil is coming would be another significant breakdown in the US dollar from the March 13 price range again. T.Y.

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WTI Crude Oil Price Forecast: Basing Pattern Favoring Higher Prices

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