Crude Oil – Weekly Analysis, 30/04

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Crude OIl_OPEC

WTI Crude Oil breaks above $58, the inverted head and shoulders minimum price objective

Crude Oil futures completed its inverted head and shoulders pattern as price managed to break above 58. At the time of writing Crude Oil futures was trading at 58.65 and the uptrend looks well supported by the minor rising trend line. The current price levels marks a recover in Crude Oil price after a prolonged slump in prices last year.

In the near term, we could expect to see a retest down to 58, in order to establish support and from there on, Crude Oil could attempt to test the next resistance near 63.41 through 65.9, a strong support and resistance level.


WTI Crude Oil, Daily Chart – 30/04


The main driving factor for Crude oil fundamentally has been a slowdown in the buildup of commercial inventories, released weekly by the US Energy Information Administration. In its latest report, Crude oil inventories increased 1.9mn barrels compared to 5.3mn previously.

However, it is unlikely that the EIA’s Crude oil report is solely to be the reason for the rise in Crude Oil prices. A weaker US Dollar is also partly one of the reasons the commodity has managed to rise steadily, especially at a faster pace since hitting the lows of 42.40 around mid-March. In terms of supply, there hasn’t been any significant shift in OPEC or other Oil producing nations cutting back on production, which points to the fact that the Greenback’s strength is one of the reasons for the current gains in the commodity.

While it is too early to speculate if we have seen a bottom in Crude oil, resistance levels overhead continue to weigh in. First, a major support resistance level between 65.9 through 63.4 needs to be broken. But given the strong resistance here, we expect to see the bulls and bears battle it out. A failure to break above this first level could send prices back down to $58, which should technically hold out as support to help push prices to attempt another test to break above the 65.9 – 63.4 levels. A break below 58, will no doubt attract fresh sellers into the markets.

To the upside, assuming prices manage to break above 65.9, we could then see another leg higher towards the levels of 79.75.

The weekly chart for Crude Oil, shows the upside target in the longer term comes in at $62.13. This also coincides with the pitchfork’s upper median line, which could act as resistance. Any declines on the weekly chart could give an early indication of a weakness to the bullish momentum setting in, as price would close below the median line which could see a further decline to $53.5 levels.


WTI Crude Oil, Weekly Chart – 30/04


Another point to note is that a retest to $53.5 would see prices retesting the break out from the minor trend line, which if successful could see the commodity eye for more gains above the initial weekly price target of $62.13.

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