Oil Price Forecast – Oil Only Showing Minor Signs of Possible Bottom So Far
Crude oil continues to struggle to create at least a short-term bottom following a 24.8% decline over 19 days. Even though there are some small signs of a possible bottom, price action of the past few days is not yet convincing.
The market reached a low of $49.30 on Tuesday, which was followed by two days of higher daily highs and higher lows. This is slightly bullish but could also be a short-term bounce before price slides further. Similar behavior was seen two-weeks ago over two days, while the longest bounce on the way down has been three days. Consequently, four consecutive days up will be a change in the pattern.
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Daily Trend Pattern
On a daily basis the most recent swing high (minor) of $54.35 would need to be exceeded on the upside before we no longer have a downtrend with lower swing highs and lower swing lows. Fibonacci retracement levels have been added to the enclosed daily chart for the two major legs down in the current trend. These can be used as upside targets for oil if we get a bounce and for possible resistance areas.
Possible Expanding Triangle Pattern
The low to date for the current trend may be the bottom of a developing expanding triangle as price stopped right at support of the line drawn across the bottom of the past year’s consolidation range. Keep this in mind going forward as the line starts moving below $49.49 as time goes by and therefore may continue to mark support. It also indicates that once a bullish reversal starts it essentially may be heading back to the top line of the triangle.
Emerging Bullish Intraday Price Action
Once we have a daily pattern, as noted above, then an intraday pattern can be used to tighten a setup and risk management. We can see from the enclosed 1-hour chart how oil pulled back to the 61.8% Fibonacci retracement area on Thursday before bouncing slightly. It remains to be seen whether the retracement low of $50.22 will hold. Regardless, there are a couple things we can look at to give us an indication of strength.
A prior swing high at $51.53 has been exceeded and the more sensitive 21-period exponential moving average (ema) has moved above the 55-period ema. It remains above at the time of this analysis, even after today’s pullback.