WTI crude oil up over 25% in just two months
WTI crude oil has staged the greatest rally since the beginning of 2016, when it doubled in just four months. The daily chart below shows a 35% gain in less than five months from the low in June. The price recently sailed through the previous high set in January of this year at $55.24. It is now revisiting levels not seen since mid-2015.
So that’s a fantastic run for bulls, but can it continue? The weekly chart below shows the longer-term picture. Note the stunning collapse in the first half of the chart from $112 to a low just over two years later at $26.05. Bulls want to know if the recent rally is the start of a new trend or just a bounce in a longer-term bear trend.
The daily chart certainly looks very positive with no resistance of any major concern. The price is well above any downward-sloping trendlines and accelerating away from the longer-term moving averages. The blue 100-day moving average has begun to turn higher and looks set to cross the 200-day moving average for a bullish signal in the days ahead.
The 55-day moving average has already crossed above both these and is accelerating higher. We are even pushing above the outer boundaries of the Bollinger bands. Is there nothing to hold the bulls back?
As you know by now, I always warn it is very important to monitor the longer-term charts, no matter how much of a short-term trader you are. Back to the weekly chart, you see the price approaching important longer-term 38.2% Fibonacci resistance at $58.97. Coupled with that is the equally important downward-sloping 200-week moving average, just starting to dip below this Fibonacci level.
This is the most important area of resistance, as we cross back above the 23.6% Fibonacci level and 100-day moving average at $46.20/46.40. In severely overbought conditions on both the daily and weekly charts, there is an obvious risk of a peak to the 22-month recovery.
Just above that $59 level we meet the upward-sloping 17-month trendline (from June 2016) at around $60.50. Bulls will need to break through this level to remain in full control of the price, and then tackle the (less important) 2015 year high at $62.58.
If you are a WTI crude bear looking for a low-risk selling opportunity, it could be worth trying shorts in the $59-$60 area with a stop above that 2015 year high. There is great profit potential on a short position if we reject those resistance levels.
A move back below the January high at $55.24 would signal further weakness. We should then target the mid-$53 area before testing the September high at $52.86. There is, however, certainly room to move as far as strong support in the $47-$46 area.
Technical Analyst & Trader
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