Crude Oil Technical Outlook - Short-term Bullish, but Could Change Soon
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Crude Oil Technical Outlook:
- Oil price moving higher inside channel, but momentum weak
- Channel could turn into a bear-flag with the proper price action
For an intermediate-term fundamental and technical viewpoint, see the Crude Oil Forecast.
Oil price moving higher inside channel, but momentum weak
Since bottoming in early October oil has been a bit of a mess as it tries to gain footing and reverse the down-move that unfolded during September. The overlapping price action during the past month suggests that we will eventually see another leg lower, validating the channel as a worthy bear-flag.
But for that to happen we will need to see the lower parallel break, first, before running with a bearish bias. A break of the lower parallel validated by a drop through the October 31 low at 53.66 should have WTI rolling downhill towards the 50-line, and potentially the 2016 trend-line, a target that has long been on the board.
At the immediate moment oil is running into the 200-day, which may be the end of the current up-move. But a break through the long-term average and the upper parallel will quickly take the bite out of the bear set-up, positioning for a move to trend-lines running lower from October 2018 and April of this year.
Check out the IG Client Sentiment page to see how changes in trader positioning can help signal the next price move in gold and other major markets and currencies.
WTI Crude Oil Daily Chart (200-day, channel/bear-flag)
WTI Crude Oil Chart by TradingView
Obviously, Brent is taking on a similar shape to its U.S. counterpart, staying confined in a channel. One of the differences is where the 200-day is situated, it’s a bit higher near the trend-lines from October 2018 and from April of this year.
Also, should the lower parallel break and develop into a move below 59.60, the 2016 trend-line is quite a bit closer for Brent than WTI, as well as the lows from August and October. It makes the technical landscape a bit tighter in the UK contract.
Brent Crude Oil Daily Chart (maintaining channel)
Brent Crude Oil Chart by TradingView
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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.