WTI crude oil bulls eye a break to $80

I posted an article titled “crude oil looks stretched at its cycle lows” following the close on February 5^th, so I’m glad to see it has since risen close to 9% since it was published. Yet there has been some choppy price action over the past 10 trading days as it has effectively bounced between its 200-day EMA and the January high.

This has made crude oil ideal for range-trading, although I do see the potential for at least a run above the January highs and for it to tag $80.

 

WTI crude oil technical analysis (Daily chart):

Price action does appear to be placing the Jan high / 2023 open zone under pressure for a potential breakout.

 

• WTI crude has just posted its two best days over the past 11, heading into resistance
• The 200-day average has provided dynamic support multiple times during the past two weeks
• Bullish momentum on the 1-hour timeframe appears to be strong heading into the highs
• Large speculators and managed funds have continued to trim shorts and recently increased longs

 

However, also take note that daily trading volumes are falling and a bearish RSI (2) divergence if forming, so a breakout and move to $80 might even be a ‘last hurrah’ before price revert back to within the current range. Also note that the rise in recent weeks has mostly been a function of short covering.

 

WTI crude oil technical analysis and market positioning (weekly chart):

What makes me reserved regarding the potential for runaway gains is that the weekly chart is making hard work of developing a bullish trend. And without a fresh catalyst following a 16% rally from the December lows, perhaps it may struggle to make a break and hold above $80. But that doesn’t mean it can’t give it a good go with a shakeout around these cycle highs first.

 

 

WTI crude oil technical analysis (1-hour chart):

A strong rally has formed on the 1-hour chart for WTI crude oil. Prices tested the January high on Tuesday on headlines that OPEC+ were considering extending their oil output cut which prompted concerns of tighter supply.

 

Prices have since retreated from Tuesday’s high, so we’re looking for evidence of a swing low above the $78 handle / weekly R1 pivot point at $78.18. Bulls could seek dips around or above this potential support zone in anticipation of a break higher and target the resistance zone which includes the weekly R2 pivot, $80 handle and Q2 open.

 

 

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

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