Crude oil spent Thursday and Friday last week moving lower after OPEC kept production unchanged. The price fell from 72.88 on Thursday to a low on Friday of 65.86 (see blue circle 3 in the chart below).
The price today opened and once again moved lower, reaching a price of 63.73. Since, then the price has rocketed higher to 69.52 so far. The % gain from the low? A whooping 9.08%. Wow.
Oil went from below channel trend line support to above topside channel trend line resistance.
The initial move lower on the hourly chart today, fell below the lower channel trend line support. When this occurs this is an acceleration of the the selling. Typically, it is best to not stand in the way of the momentum break through a lower trend line. However, if the price can move back above that broken trend line, it can lead to a reversal of the momentum as a result of the failed break.
This is what happened as the price first tested the underside of the broken trend line, then was able to move back above that lower trend line at 64.87 (see chart above). From there, the buying/covering started.
Currently, looking at the same hourly chart, the price is back above the topside trend line at the 68.91 level. and also the 38.2% of the move down from the November 21 high at the 69.08 level. The buyers remain in control above these levels (risk for longs).
Looking at the daily chart (see chart below), the high from yesterday came in at 69.58. The high today comes in at 69.52. A move above the high from yesterday – coupled with lower low today – would create an outside reversal day (bullish). The next target would be to get back above the broken lower trend line on this chart. That level comes in at 70.00 area (see chart below).
Did oil go too far too fast? Well judging from the action today. Absolutely. How much higher can it go? Get above the 70.00 level and the 50% of the move down November 21 high comes in at 70.73. This is also near the 100 hour MA currently (blue line in the chart above).
Above those levels and the price will look towards the low from November 14 (blue circle 4 in the daily chart below) at 73.16, and then the 75.44 level (38.2% of the move down from the September 30 high). Both are in play if the price keeps ticking higher. Watch 68.91 as close support now.
A move above the 69.59 and then 70.00 would be bullish for oil.
