Will WTI crude continue its seven-month bull run?

Jason Sen

This month marks the two-year anniversary of the WTI crude oil recovery. The slow-but-steady bounce of about 40% from the previous three-year collapse shows no sign of a top at this stage, despite being severely overbought. The weekly chart shows the rally celebrating after we beat the 23.6% Fibonacci resistance at $46.39, using this and the blue 100-week moving average as a springboard.

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In fact, at the end of last month, we broke above two important barriers. We breached 38.2% Fibonacci resistance at $58.97 and the descending red 200-week moving average line just below this level. As you can see in the weekly chart, we are now making a positive break above the 18-month ascending trendline. This should give further encouragement to bulls.

As I write we’re tackling one of the less important barriers in the form of the 2015 high at $62.56. I think the fact that we are sitting in severely overbought territory only emphasises the strength of the momentum. So this is not a reason to be concerned about a significant sell-off.

In the daily chart below we see the most recent upswing which began on 7 June 2017. This seven-month rally has been a solid steady move up, with short periods of consolidation. There have been no significant moves to the downside at least since the end of August. There’s no question that bulls are firmly in control.

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Bulls of course require a clear and sustained break above $62.60 to remain in full control this week. This would initially target $63.00/05, then $63.70/80. However, I see no immediate reason why we cannot eventually target the 200-month moving average at $65-$65.50. Above here I do not really see a significant barrier below the 50% Fibonacci level of $69.15, so this is the ultimate target for the next leg higher.

If overbought conditions do trigger some short-term profit-taking and we are unable to hold above the 18-month trendline at $61.70/$61.50, I expect a slide to the first Fibonacci support at $60.80/70. If we were to continue lower it would be worth using strong support at $59.60-$59.00 as a buying opportunity in the bull trend.

However, if we see a further setback we need strong support again at $57.70 down to $57.00 to hold. This is the last line of defence for bulls, as a sustained break below here is a sell signal.

Jason Sen

Technical Analyst & Trader

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