While everyone has been focusing on Crude Oil futures crossing the round $100.00 handle back and forth, the struggle to find a clear direction has led to higher swing lows and lower highs, hence the market is stuck in a triangle pattern. With a distance of less then $2 between the triangle resistance and it’s support, as price is nearing the tip of the formation, we should see this struggle come to an end in the coming days.
The 61.8% Fibonacci retracement bounces, first for the drop from $112.13 to $91.33, followed by the perfect 61.8% Fibonacci correction to $102.21 for March’s bearish swing, have led wave analysts to consider the possibility that a downward continuation is in play. This scenario will be invalidated if price will rally above $102.21. Activating the stop losses accumulated above this level will help the market make rise towards $104.19 – $105.20, where sellers would once again have their long term bearish view put to the test.
With most major moving averages already stationed inside the triangle formation, there is little point in picking any other first support other than 98.85, the most recent swing low on the support trendline. A bearish triangle breakout is unlikely to reverse at $98.10, the 100-Day Moving Average, since the logical downtrend scope is the formation of a lower low below $97.35.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
