Crude oil has been working on establishing a potential bottom for a couple months and has recently begun to show new signs of strengthening. On Tuesday, crude oil consolidated and will establish an inside day with a high of $64.16 and a low of $62.67. This followed a reclaim of the 50-Day MA on Monday, which was confirmed by a daily close above the 50-Day line, currently at $62.95. Also, a weekly breakout triggered above last week’s high of $63.43.
50-Day Line Reclaimed
That was the first daily close above the 50-Day MA since April 2. Tuesday’s low of $62.67 was a successful test of support of the 50-Day line and today’s closing price will likely be above that line for the second day in a row. Once prior resistance is shown as support, the trend is showing signs of wanting to go higher.
Nonetheless, price structure takes precedence, with a series of recent lower swing highs remaining intact. The last lower swing high of $64.67 is a crucial pivot point. A decisive rally above it will trigger a continuation of the advance that began from the second recent bottom at $55.81 in early May.
Potential Bull Flag Forms
Over the past month or so crude has been consolidating within a relatively narrow range that has now taken the form of a potential bull flag (purple) trend continuation pattern. Dynamic resistance is marked by a top falling purple line connecting yesterday’s high. Therefore, a rally above Monday’s high of $64.16 will provide an initial flag breakout signal, with a second and confirming signal above the top of the flag at $64.67.
An ABCD pattern covering the flag pattern shows a potential upside target around $68.98, which aligns with a potential resistance zone marked by the 78.6% Fibonacci retracement at $68.80 and the 200-Day MA, now at $69.29. The 200-Day line marks the top initial target for crude oil if it continues to strengthen. Keep in mind that the 200-Day MA is falling and getting closer to the Fibonacci and ABCD target.
