Signs of Bullish Momentum
A higher swing low was established with Monday’s low of $66.12. Bullish momentum was represented by Monday’s bullish engulfing pattern. That followed strong bullish momentum seen in a full green candle from the upside breakout of a small pennant consolidation pattern that triggered last Wednesday. Together, these signs show demand improving for crude oil.
Minimum Upside Targets are Higher
Notice that the general minimum potential Fibonacci retracement of 38.2% at $70.14 has not yet been reached. Once a reclaim of the 200-Day MA is confirmed, higher targets become more likely to be tested. From the 50% retracement at $72.73 to a prior swing high at $72.49 marks the next higher potential target zone. And if the 50% level can be reclaimed with a daily close above it, an advance to the 61.8% Fibonacci retracement at $73.31 could be next.
Higher Target at 38.2% Fibonacci Retracement
Given Monday’s higher swing low, a small rising ABCD pattern has been added to the chart. Interestingly, an initial target at $69.45 was completed today, right on the button. However, a projected 127.2% ABCD pattern target is at $70.36. Since it is close to the 38.2% Fibonacci level, the two price levels can be considered as a potential resistance zone from $70.14 to $70.36.
Trend Resistance Stalls Ascent
Despite the potential for higher prices, today’s high resistance could hold and lead to downward pressure. Since resistance at today’s high was confirmed by both the 20-Day MA and 100% target for the ABCD pattern, that could be the end of the bounce. Where crude oil closes relative to the 200-Day MA should provide a clue as a close below it will be a weaker sign than a daily close above it.
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