OIL : Prepare for Resistance
(Thu, 4 Feb 2021). Oil prices have surged more than 7.2% since the start of February with WTI breaking to fresh yearly highs to trade at 55.89 in early US trade on Wednesday. While the recent price breakout keeps the outlook weighted to the topside, the rally is now approaching multi-year slope resistance and may be vulnerable heading into this zone near-term. These are the updated targets and invalidation levels that matter on the oil price weekly chart. Review my latest Strategy Webinar for an in-depth breakdown of this crude oil price setup and more.
CRUDE OIL PRICE CHART – WTI WEEKLY
Notes: In my last Oil Price Outlook we noted that the WTI price breakout was testing the first major resistance confluence around ~50.58and to, “look for downside exhaustion ahead of the median-line on pullbacks IF price is indeed heading higher with a weekly close above the upper parallel needed to keep the bulls in control.” The advance accelerated in the following days with a weekly close above fueling a month-long rally that has already taken out initial resistance objectives at the 2016 high at 54.48.
A three-day advance now takes oil into the 2018 trendline and we’re looking for possible inflection here. Initial support now back at 54.48 backed by former pitchfork resistance / monthly open support at ~52.16 – a break / close below this threshold would risk a larger correction towards 50.58 with key support / broader bullish invalidation at the yearly open / yearly lows at 47.16-48.18. A topside breach from here keeps the focus on key resistance at 59.16-60.66- a region defined by the 2020 high-week reversal close and the 61.8% extension of the April rally. Look for a larger reaction there IF reached.
Bottom line: The crude oil rally is approaching multi-year slope resistance just higher and the immediate focus is on a reaction into the 2018 trendline. From a trading standpoint, a good zone to reduce long-exposure / raise protective stops- pullbacks should be limited to the monthly open IF price is indeed heading higher with a close above this trendline keeping the focus on key resistance into the 2008 trendline.
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