Crude oil forecast: Bullish golden cross looms as WTI hits 2024 highs

WTI crude oil trades at 2024 highs
The 50-day moving average is about to cross the 200-day moving average from below, generating a ‘Golden Cross’
Prices have typically rallied when golden crosses have occurred in the recent past, although there are some caveats to consider

The overview

WTI crude oil has surged to the highest level since October, underpinned by bullish fundamental and technical factors. The rally has seen the 50-day moving average flick sharply higher, putting it on track to generate a Golden Cross as it moves above the 200-day moving average.

History suggests this may fuel further gains despite the price sitting in overbought territory.

The background

Crude has a lot going right for it right now, explaining why prices have surged to the highest level since October 2023.

Supply discipline from major OPEC producers and Russia is helping to tighten the market, as is ongoing resilience from major economies, keeping demand firm. Until that backdrop changes, it’s hard to see the prevailing trend reversing meaningfully, especially with geopolitical tensions in the Middle East remaining elevated.

It’s not just fundamentals working in oil's favour, either. The charts are also chiming in with the upswing in prices triggering fresh waves of buying on each bullish break, helping to keep momentum moving to the upside.

Having broken long-running downtrend resistance cleanly in March, WTI has subsequently smashed horizontal resistance at $83 before doing away with $85.50. With the price continuing to trend higher, it’s seen the 50-day moving average turn sharply higher towards its 200-day equivalent, leaving it on track to generate another bullish technical signal: a golden cross.

The last time the 50-day moving average crossed the 200-day moving average from below in 2023, it triggered a more than 22% rally, pushing WTI to levels not seen since Russia’s invasion of Ukraine.

While the predictive powers of the golden cross are imperfect, from 2016 onwards, whenever the gap between the two averages was more than 5% prior to the crossing occurring, the price has been higher two weeks later on four of five occasions. The only exception was in late 2020 when the price slid 20% following the crossing before embarking on a near 300% rally.

So the cross does have recent form on the board, pointing to the potential for further gains despite the price sitting in overbought territory on RSI.

The trade setup

Having broken resistance at $85.50, if the price manages to hold above it near-term it will provide a decent setup for traders, allowing for long positions to be established above with a stop-loss order below to protect against a reversal.

There’s no major visible resistance on the charts until $89.50, although the price did some work around $88 back in September last year. They’re two potential upside targets. Above, $93.65 and $95 are the next topside levels to watch. If the price moves in your favour, you could move your stop-loss order up to entry point, allowing for a free shot at upside.

While the price is overbought using RSI on a daily timeframe, as seen in September last year, that is not necessarily an impediment to further gains.

The wildcards

Past performance is not indicative of future returns, so just because the golden cross has delivered gains in recent times doesn’t mean it will now.

Geopolitical tensions in the Middle East are a huge wildcard, holding the power to move prices significantly depending on near-term news flow. Therefore, supply side factors screen as far more important for the near-term price trajectory than the demand side of the equation.

-- Written by David Scutt

Follow David on Twitter @scutty

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.