Crude Oil Technical Highlights:

  • WTI crude oil continues to coil towards what will likely amount to an explosive move
  • Longer-term points to higher levels but need a bit more confirmation
  • Can’t rule out a downside break, so need to wait

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December WTI crude oil futures continue to coil up, with the swings becoming increasingly smaller since the end of August. This signals that while oil has been broadly directionless that is about to change. To start October oil posted a monster week to the upside, since then it has been digesting.

This price action coupled with the longer-term trend uptrend suggests the wedge that is building is more likely than not to resolve to the upside. However, even though probability appears skewed to the top-side confirmation is needed.

The 200-day moving average is proving to be problematic at this time and in conjunction with breakout territory. A firm crossing of the 200 and top-side trend-line should get things rolling for oil, with the current front month contract (December) having resistance around 92.42, then more significant resistance in the vicinity of 95.

The size of the wedge and general trend higher point to a sizable move, and if indeed it is up then a breakout could kick off a move back to the June highs. This would almost certainly take some time to achieve, but the trend structure and price action is there to support the notion that we will see those levels again relatively soon.

On the flip-side, a breakdown could develop as the wedge doesn’t itself signal direction but rather that a move is coming. In the event we see oil roll over and take out 85.30 with conviction then the next level to watch is the trend-line from 2020. This trend-line is meaningful now that we had a strong test and hold at the end of September. If that breaks, then the low at 75.70 and worse is at risk.

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—Written by Paul Robinson, Market Analyst

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