Structural Support and Technical Indicators
Meanwhile, key structure support is at the recent higher swing low and weekly low of $97.31. The long-term chart for crude oil suggests the potential for higher prices over time. The question is whether new high prices will follow a period of consolidation or a pullback first. Certainly, price is overextended on the upside, as reflected by extreme overbought readings in the relative strength index (RSI) on the weekly chart, and the bearish RSI divergence seen in the daily chart. Each timeframe suggests that crude oil could use a correction of some degree before continuing.
Breakout Confirmation and Targets
Nonetheless, a decisive advance above the high of $119.54 triggers a continuation of the bull trend. The breakout will be confirmed with a daily close above that level, putting crude oil on track for initial short-term targets of $127.63 and $131.32.
ABCD Pattern and Pullback Potential
Tuesday’s advance essentially completed a 127.2% projected Fibonacci target of $118.62 for a rising ABCD pattern. Given the subsequent bearish reaction, it appears the market has acknowledged this target. With that target above the 88.6% Fibonacci retracement level at $114.61, it could easily lead to a pullback to test support near the 10-day moving average, now at $102.84 and rising. This return to support would show the balance between bullish continuation and necessary short-term corrections.
