Crude Oil Price Forecast: Crude Dips Then Recovers Above 20-Day Support Line

Crude oil failed an attempt to break out above the three-week high of $64.06 on Tuesday. That led to an inside day of consolidation on Wednesday and a sharp decline today, Thursday. A lower daily high and lower daily low were established from $63.00 to $60.55, respectively. Selling accelerated following a breakdown from Wednesdays inside day, which led to a four-day low and a drop below potential support around the 20-Day MA.

Although the 20-Day line was broken, now at $61.36, there has been a quick recovery back above the 20-Day line since. If the day’s session ends above the 20-Day line, the quick drop below it earlier carries much less weight as a bearish indication.

Quick Recovery of 20-Day Moving Average

The decline on Thursday completed a 38.2% Fibonacci retracement at $60.88 and it was followed by a sharp bounce back above the 20-Day MA. This was the first pullback following a reclaim of the 20-Day MA on May 12. Prior to that time the price of crude oil had traded largely below the 20-Day line since April 3. It was clearly shown as resistance during the first advance from the April bottom and was anticipated to show as support during weakness. If it continues to hold as support, then the second rise off the bottoms has a chance to continue to higher prices.

Bullish Outlook Above 20-Day Line

There is a lower swing high at $65.32 from April and a reversal of the immediate downtrend is not indicated based on price structure until there is a sustained advance above that high. However, given how close the net lower price level of significance, it would need to be reclaimed first. First, notice that the 50-Day MA (orange) is falling and currently at $64.23.

An interim swing high (found resistance at 20-Day MA) and a three-week high is at $64.06. If crude can manage to close above that price level it has a chance to challenge the $65.32 swing high, keeping in mind potential resistance around the 50-Day line. If crude can remain above the 20-Day line, it continues to have a chance at higher prices. Otherwise, the 50% retracement at $59.91 and 61.8% retracement at $58.95 become lower potential targets.

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