Crude Oil Technical Forecast: Oil Bulls Don’t Look Finished Yet

[MongiIG]

CRUDE OIL TECHNICAL FORECAST: BULLISH

• It was a big week for oil bulls, after running into monthly support at 93.53 and then posing a topside break of a falling wedge pattern.
• Last month I looked at a morning star formation on the daily chart that led to a 13% bounce in the following week. Now – there’s a possible morning star brewing on the weekly chart.
• The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

I last looked at oil prices in our weekly forecasts about a month ago, just after crude had snapped back from the 130.00 level, retracing more than $35 in about six trading days. At the time, a morning star formation had built on the daily chart which can often be indicative of bottoming.

That led to another 13% move in the week that followed, with WTI eventually finding resistance around the same 114.83 level that I had pointed out. This was the 2011 swing high so naturally it’s held some pull in oil markets as that’s currently helping to mark the monthly high in WTI.

That resistance inflection on March 24th led to a bearish outlay for the next two-and-a-half weeks before support finally came in again from the same lows that were in-play in mid-March, plotted at around 93.53.

WTI CRUDE OIL DAILY PRICE CHART

Chart prepared by James Stanley; CL1 on Tradingview

A BIG WEEK FOR OIL

This was a big week for oil as prices broke above that bearish trendline that’s set the tone since the high was set. After running into that support at monthly lows on Monday, bulls pushed all week, back above the 100 level and eventually above 105.00.

But, if we look at that sell-off from the four-hour chart, it shows as a falling wedge. This formation is often followed with the aim of bullish reversals, which appears to be what’s taking place with this weeks topside move.

WTI CRUDE OIL FOUR-HOUR PRICE CHART

Chart prepared by James Stanley; CL1 on Tradingview

CRUDE OIL LONGER-TERM

That formation that we looked at in the beginning of this article and the same one that I was using last month to follow that bounce in crude, it’s back again. But this time it’s on the weekly chart. It’s not complete yet – we need the week to close first without price pulling back too much for the formation to finish, but this keeps the door open for bullish potential after buyers made a pronounced re-entry into the situation this week.

Morning star formations are often followed with the aim of bullish reversals, positing that a bottom is in play, whether it be short or long-term. And, from the weekly, given the number of tests at that 93.53 level combined with a bullish engulfing candlestick, that can align for a bullish forecast for crude oil.

This keeps the focus on prices returning back to that same 114.83 level that came into play last month.

WTI CRUDE OIL – WEEKLY PRICE CHART

Chart prepared by James Stanley; CL1 on Tradingview

--- Written by James Stanley, Senior Strategist for DailyFX.com. 15th April 2022