Closing Above Moving Averages is Bullish

A reclaim of the moving averages is a bullish sign but only if crude can stay above them. Currently, and interestingly, the two moving averages have converged to identify a tight price support area from 71.58 to 71.61. When that happens, a potentially more significant pivot area may be identified. Also, notice that strength was seen recently as the 20-Day line crossed back above the 50-Day line. If the moving averages can continue as support, there is the potential for a continuation upward. However, if the price of crude oil falls below each, it will be a sign of weakening with a daily close below signaling further weakness.

Initial Upside Potential to 70.78

Let’s consider the initial upside if crude can continue to strengthen. A bullish breakout is triggered on a decisive rally above the 73.15 interim swing high and then confirmed with a close above it. That would trigger a bullish reversal in crude that should see prices rise further.

The 61.8% Fibonacci retracement is subsequently at 74.60 and it shows the next higher likely target, at a minimum. That level is also close to potential resistance around the lower boundary line of a large symmetrical triangle consolidation pattern. Nevertheless, if crude can continue to rise from there it has the potential to breakout through the top of the triangle towards 70.78 (D). That price completes an initial target for a rising ABCD pattern that incorporates the most recent swing low of 67.33 (C).

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