Crude Oil Blows Through Resistance on Way to Seven Year Highs
Crude oil talking points:
- Oil prices have made a massive move on the way to fresh seven year highs.
- While there’s certainly supply constraints to point to, the technical move feels a bit overbought at the moment. Tread carefully.
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
The year of crude oil continues! It might be difficult to remember but it was just last April that crude oil prices pushed below the zero line and here we are eighteen months later and there’s a veritable mania that’s chasing oil prices higher now.
Perhaps most interesting to a technician like myself is the areas on the chart that have been tested through. This week saw a major zone of resistance taken out near six-year-highs, and this was the same zone that had turned around the advance back in July, leading to a retracement of 19% over the next six week until oil finally caught support at the May swing low.
But since that May swing low helped to set the low in August, price action has been moving on a one-way-train with only brief pauses in its ascent. The big-bodied zone of resistance running from the 75 psychological level up to the 76.72 swing high from 2018 was a mere speed bump, at least so far, and prices have now gained as much as 28.5% in less than a month-and-a-half.
Crude oil daily price chart
Crude oil strategy near-term
Chasing the move at this point could be extremely difficult. Price action has simply jumped so far way from any nearby swing lows or relevant points of recent support that the risk outlay in trying to ride this higher could be massive.
For those that are looking at the bullish side of oil prices, a pullback to support at that zone of prior resistance could offer a more prudent and potentially risk-efficient way of following the trend higher.
Crude oil monthly price chart
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.