Oil prices are currently moving within a short-term horizontal channel between $35 and $50 a barrel.
Broadly speaking, the bullish scenario will occur if the price action jumps above $50. In this case the objective would be $65. The bearish scenario will occur if price action breaks below $35. In this case the next target would be $20.
On the medium-term, the bearish trend which has started in last July remains valid. The price action still posts lower highs and lower lows.
The recent low has been posted last Thursday at $33.55, but the price strongly rebounded to $37.5 on Friday. Does it mean that a further rebound should follow?
It actually may be possible as the indicators confirm this potential move back on the upside. First the RSI (Relative Strength Index) plunged in the oversold area when price fell down to $33.55 last week. With the following rebound, this oscillator curved back upward and crossed its signal line. This argues for a further rebound. Investors and traders that are trend followers close their positions as the trend weakens, and open new trades on the other way if the trend reversal is confirmed.
This creates the volume that eventually creates the price action.
Look at the 2-weeks technical momentum indicator…
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It shows that it also bottomed last week at the level where it had previously bounced back during the last three months.
The near-term seems to be therefore quite bullish for Oil prices. The target of $50 is realistic if the momentum strengthens: it would be a rise of 33% and would surely trigger taking-profit orders around $50, which is also a kind of “psychological” number, like 100 and 150.
If the price action jumps back towards $50, then the low of $33.55 will be considered as the completion point of the bearish trend started in July, therefore the inflection point.
On the medium-term, a Fibonacci retracement analysis between the high point of July and this low point of February (points A and B on the chart) shows that the first ratio that will act as a resistance will be the level of $64.
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