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Oil Price Forecast – Oil Holding Support and Still Has a Chance to Turn Higher

Bruce Powers

Oil moves into its fourth day of consolidation around a potential bottom off the trend low of $49.33. That low was reached Tuesday and is 24.82% below the $65.62 peak hit after 19 trading days.

Chance for Bullish Reversal

Even though price has not yet been able to rally much off that low, there remains a decent chance that it might. At the bottom the 14-day Relative Strength Index momentum oscillator (RSI) was the most oversold since June of last year. Not a signal by itself but supporting evidence for a possible reversal.

Developing Broadening Formation

Further, price stopped falling right at support represented by a trendline drawn across the bottom of a one-year consolidation zone. Given where it starts, the line is angled down. If price continues to hold the line it will be the lower boundary of a developing large broadening formation. In this case, price would be anticipated to eventually rally back towards the top rising line.

As of now, resistance of the 5-day range is at $52.16, while the low of the range is $49.33 low. Keep in mind that, given the angle of the line, price can break below the recent low and still stay above the line.

Intraday Chart Provides Greater Detail

We can see recent price action in greater detail when looking at the 1-hour chart. It shows an initial breakout above a prior swing high at $51.53. Also, the shorter purple 21-period exponential moving average (ema) crossed above the longer orange 55-period ema. These are the first signs that sentiment might be starting to change from bearish to bullish, at least in the short-term.

At this point, a bullish short-term signal is indicated on a move above the $51.46 swing high on the 1-hour chart. So far, oil is still within a pullback and looks like it might be heading to a possible support level around the 78.6% Fibonacci retracement at $49.91. An ABCD pattern with a 78.6% target also completes there. That’s where the second leg down, or the C to D leg is 78.6% of the first leg down, or the A to B leg, and it reflects a certain degree of symmetry between the swings.

This article was originally posted on FX Empire

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