FREE Guide - 5 Chart Patterns You Need to Know!

Crude Oil Consolidating and Looking to Breakout


The last down-wave in light sweet crude oil (CL) started in late June when the price was trading around $61. The decline continued into August, eventually reaching a low of $39.22 on the December contract.

A sharp rise followed, pushing the price to a swing high of $50.89 within five trading sessions. Since that high on August 31 the price has been consolidation between $48.48 and $44.67. On September 24 the price dropped below $44.67, but only briefly. A closing price below $44.67 would carry more weight in indicating a breakout lower in crude oil. If the price can't close below $44.67 on September 24, then the day low (currently $44.31) would be the new low of the consolidation and the future breakout point to watch.

The initial target for the decline is the recent low at $39.22. The current setup is similar to what was seen early in the year: a large selloff followed by a small reversal on higher volume, a consolidation and then a break lower on lower volume. The price stalled out near the prior low before seeing a more significant bounce. We'll see if a similar scenario plays out here.

Figure 1. December Crude Oil (CL) - Daily Chart

If the price rallies from here, look for a breakout above the consolidation high at $48.48. Given the long-term downtrend a breakout higher is more prone to being a false breakout, and the price still has to rally through the $50.89 high before it can gain serious traction. Upside targets in that case are $53 and $58.

 

Get This FREE Technical Analysis Guide!
Timing is everything, and with this guide, you'll learn how technical analysis can help find the right time to enter and exit your futures trades. Nearly 30 explanations and examples of the most popular technical analysis tools are all in this one handy guide. It's like having a futures trading mentor at your side!