Sitting at Strong Support
Regardless of the potential for a deeper correction there is reason to believe that support from last week may be strong enough to lead to a bullish reversal before a new retracement low is seen. Other evidence for support includes a lower rising trendline, the neckline breakout of a double bottom reversal at $65.33, and an anchored volume weighted average price line (AVWAP) measured from the April swing low.
Moreover, Monday’s low bounced off support at the intersection of the uptrend line and neckline, and today crude oil found support at a slightly higher daily low and around the uptrend line. Those lows are further confirmation that support is being retained. And they show the market recognizing the price area represented by the lines.
Rising Channel Points Higher
The lower uptrend line is also part of a rising parallel trend channel. A bearish reversal from the top of the channel occurred last week. Based on the channel, a lower target has been reached, the bottom of the pattern. Notice that the top channel line was successfully tested as resistance for seven days before sellers took back control, indicating that the market seems to recognize the channel. If it continues to do so, a bullish reversal should follow current consolidation.
Breakout Above $67.41
A breakout above the top of the five-day consolidation range at $67.41 is needed before there are indications of a potentially sustainable bullish reversal. Potential resistance area to watch during a bounce starts with the confluence of last Tuesday $68.86 high, the 20-Day MA, now at $68.44, and the 200-Day MA, currently at $68.93.
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