Thursday's Market Minute: Crude Oil Cracking Resistance, But No Big Breakout Yet

It’s been a challenging couple of years for crude oil bulls as the /CL futures contract has fallen by almost 45% since the highs of 130.50 in March 2022 and price has steadily moved lower since June of last year. More recently, traders have seen a descending triangle-type pattern, with price largely contained within a downward trendline beginning with the high close of 74.22 on May 24 to the upside and clear horizontal support where price bottomed out around 67 three times to the downside. 

However, at least in the shorter-term, there are some potentially bright points for the bulls from a technical standpoint. First, price is moving to the upside beyond the previously mentioned short-term downward trendline. Second, momentum is improving, as seen by the Relative Strength Index’s (RSI) bullish crossover above the 50 midline yesterday. Additionally, price closed above several of the shorter-term moving averages in recent days – most notably, the 50-day Simple Moving Average yesterday. Finally, these shorter-term moving averages, such as the 21-day Exponential Moving Average, are starting to shift from sloping downward to sloping upward. This is an indication that the overall trend is starting to improve.

There are still notable hurdles to clear before there’s a rally in oil. Traders first need to see a close above that short-term trendline, as well as a move beyond the 63-day EMA, which comes in around 72.27 in premarket trading. A break above the area near 72.40 would also be notable, as it is the site of a double-bottom from Jan. 5 and Feb. 6, and more recently was where price topped out twice on June 7 and 21 in terms of closing prices. To the downside, watch for price to hold the 21-day EMA currently near 70.56, while the triple-bottom near 67 is a major floor to watch.

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