Five-Week High Breakout
Earlier in the week crude oil triggered a bull breakout to a five-week high of $71.33. It is on track to end the week in a relatively bullish position, in the upper third of the week’s trading range. If it can close the week above $69.98, the bullish breakout on the weekly timeframe will be confirmed. That would potentially increase the possibility of a continuation to the upside, at least to the next target zone mentioned above.
If the advance can continue, as the weekly chart supports, the 61.8% Fibonacci retracement zone at $73.31 is the next upside target. A downtrend line crosses through that Fibonacci level by August 11. After that a downtrend line will represent potential dynamic resistance prior to the 61.8% level.
Support at 200-Day Moving Average
Given that there have been signs of short-term resistance over the past couple of days, a pullback might follow. Potential support around the 200-Day MA is a key area to watch for a bounce and bullish reversal. However, if selling persists there is a consolidation zone of potential support down to the recent low at $65.63. That should slow down bearish momentum if it persists. This week’s low of $65.90 is also a potential support area of note, as well as last week’s high of $67.68.
Upside Potential Remains
It is important to keep in mind that crude oil remains in a five-day consolidation zone until it confirms the weekly breakout. A rise from the bottom of a large descending channel at the April swing low pointed to a potential test of resistance at the top of the channel. That happened in June. Now that crude is again rising from key support levels, the top of the channel becomes a potential target. Keep this in mind if crude oil gets closer to the top channel line.
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