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Bull Breakout Fails
A rally earlier in Tuesday’s trading session saw crude oil trigger a potential breakout of a double bottom bullish reversal pattern. However, the subsequent bearish reaction negates that breakout and adds to the risk of a failed bull breakout. Therefore, the chance that crude oil may challenge recent lows before attempting to go higher again increases. Although a drop below today’s low would provide the next sign of weakening demand, crude oil would be falling into a support zone that has been retained for approximately 10 days, including today.
Crude oil completed a successful test of resistance around the 20-Day MA and a prior interim swing low on Tuesday with the day’s high of $68.84. The 20-Day line is at $68.63 currently and the interim swing low from December is $68.82. In addition, both an uptrend line and downtrend line marked a similar price area. So, there was confluence of multiple indicators identifying potential resistance, and resistance was seen.
It was a successful test of resistance given that a sharp decisive decline followed. The subsequent intraday decline failed to find support at Monday’s low of $67.36, before reaching a low for the day of $66.92, at the time of this writing. Trading continues in the lower quarter of the day’s price range, and it is possible a lower price may be reached before Tuesday is complete.
