Dynamic Resistance at 20-Day MA
Since the sharp drop on April 3, the 20-Day MA has defined dynamic resistance of the near-term downtrend. Recently, the 20-Day line was tested as resistance twice during an initial counter-trend rally and it was followed by an accelerated decline. A second counter trend rally began from Monday’s low of $55.81 and looks like it is poised to reach the 20-Day line at a minimum.
Given the recent history resistance is expected to be seen once first approached. But if strength in the price of crude oil can be maintained there is a chance of an upside breakout. A rally above the 20-Day line would show strength but a confirmed breakout would need a daily close above that line.
Lower Swing Low Established
Monday’s low established a higher swing low, and it was accompanied by a higher swing low in the relative strength index (RSI). Nonetheless, crude oil is rising inside a bear trend on multiple time frames. Whether it can continue to rise depends on the behavior around key potential resistance levels. The first being the 20-Day MA. After that, there are several minor price levels of interest until last week’s high of $64.06, which was a lower weekly high.
Short Term Bullish
The developing weekly pattern in crude oil is bullish and may reflect downside exhaustion. Bullish behavior was also seen in the weekly candle at the prior bottom of $55.23 in early April. Regardless, a period a consolidation is also a possibility as overall volatility could begin to diminish if crude oil continues to test the lows as support and it stays below the 20-Day MA.
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