Crude Oil Rallies Off Support

Crude Oil futures (/CL) logged four straight days of gains as of yesterday’s close for a +9.4% rally, but premarket trading suggests the streak could be broken with a red day. The general shape of the price action during the past year has been noticeably triangular, with a downward trendline starting with the 52-week highs on Sept. 28 and an upward trendline beginning at the 52-week lows on Dec. 13. The recent price action was notable because it broke through this lower trendline and tested the previous lows from early June near 72.48 – but the support held, and price fought its way back within the boundaries of the broader triangle pattern.

The technical picture is somewhat improved for the /CL contract after the past week. For starters, price has recaptured many major moving averages, including the 21-day, 63-day, and 252-day Exponential Moving Averages, as well as the 50-day and 200-day Simple Moving Averages. Closing above these lines typically is regarded as bullish, and price is hanging on above the 252-day EMA, which is closest, in early trading. Other notable technical movements include a push above the yearly Volume Profile Point of Control (the price level with the heaviest trading) near 78.22, as well as a break above the yearly Linear Regression Line (line of best fit) near 77.69. Momentum is also showing some strength, with the Relative Strength Index (RSI) yesterday crossing above the 50-midline that separates bullish and bearish momentum. The Moving Average Convergence Divergence (MACD), another measure of momentum, also showed a bullish crossover yesterday.

Examining support and resistance areas, many of the aforementioned indicators represent supportive areas to the downside, most notably the 252-day Exponential Moving Average near 79.23, which will be a crucial point to hold in today’s trading. Beyond that, look to the lower end of the triangular pattern near about 74.75 and then the double-bottom supportive area near about 72.50. For resistance, the area near 80.60 represents a high point and then subsequent repeated low points before an eventual breakdown. The downward trendline near 82 and the double-top highs near about 83.75 are the next potential hurdles.

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