Crude oil continued to consolidate near recent highs on Tuesday, following last week’s sharp rally to a new trend high of $76.29. A variety of potential resistance levels were exceeded during the advance until resistance was seen around a top long-term trendline (dashed) that began from the 2022 trend high of $131.31.
Resistance around that trendline was further confirmed by a 161.8% projection for a rising ABCD pattern, and the recent double bottom pattern projects to a minimum potential target of $75.55. Together, these price levels contribute to the potential to see strong resistance that leads to a decline in oil prices or a longer period of consolidation.
Signs of Strong Demand
Nonetheless, the behavior of crude oil the past couple of days shows demand remains strong. Yesterday, crude oil pulled back to find support at the 200-Day MA and bounced. Notice that the 200-Day MA was shown as resistance on two days last week. Once it is successfully tested as support the rising trend may be ready to proceed. Buyers took back control today, as a higher daily low was established and today’s closing price looks likely to be in the top third of the day’s trading range. Moreover, crude oil looks set to end Tuesday’s session at its highest daily closing price since the beginning of February.
Multiple Signs of Strength
Strength was also shown during the rally on a bullish reversal signal that triggered above the lower swing high at $72.49 last Friday. The breakout was confirmed by a daily close above that level on Friday. Today’s closing price above that level will further confirm strength. In addition, a solid top downtrend line was broken over the past few days.
That breakout will likely be confirmed by today’s closing price above that level. What this shows is that demand for crude oil remains strong. Therefore, a breakout above last week’s high of $76.29 could occur before a deeper pullback. If it does, the lower swing high at $80.76 marks the next upside target.
