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Crude Oil Forecast – Keep an Eye on Channel as Correction Risk Rises

Crude Oil Forecast – Keep an Eye on Channel as Correction Risk Rises

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Crude Oil Technical Outlook:

  • WTI crude oil trading around 2019/20 highs
  • Up over 100% since November, correction may be due
  • Upward channel an important guide to watch

Crude Oil Forecast – Keep an Eye on Channel as Correction Risk Rises

WTI crude oil continues to rise within the confines a somewhat loose but steady channel. It is currently trading up against the 2019 and 2020 highs. This could prove to be a pivotal spot at a time when oil is up significantly without having had a meaningful correction.

The reversal the other day was powerful and indicates that sellers are in the area of the 2019/20 highs. The smallish bounce the past couple of days could turn into a failed attempt to advance, with potential to carve out a lower-high.

If this is the case, then the lower portion of the channel could be put to the test. A hold of the lower bounds would keep the trend intact while a break would be the first time the trend has come under fire since November. This could set into motion a broader correction or consolidation period.

From a tactical standpoint, crude oil is still steady at these levels. However, resistance is proving to be somewhat formidable at the moment and steady could quickly turn into weakness. Fresh longs don’t hold good risk/reward appeal, while existing longs may want to consider protecting the downside. Would-be shorts may gain the upper hand here, but do need to tread cautiously as the trend remains pointed higher. A breakout above 67.94 may accelerate the rise.

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WTI Crude Oil Daily Chart (in channel around 2019/20 highs)

crude oil daily chart

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.