This could be the new bullish trend that many analysts and investors expect. The price action just came back above the psychological level of $60 per barrel. This is the real first test for the rebound started in last February.
Remember: the large decline of Oil drove prices from a high of $147 in July last year (point A on the chart), to a low of $33.55 posted in February this year (point B). This was a 77% drop in just 7 months.
The rebound generated on point B has experienced so far three distinct phases. The first one, between mid-February to late March, was a technical bounce where prices rose quickly to $54. The second phase was a consolidation phase where the market was rangy, prices were moving between $47 on the downside and $54 on the upside. This consolidation occurred in April. The, from the very beginning of May, a second wave of momentum has been driving the price from $51 to $61. Currently Oil is trading around $61.51.
This level corresponds to the first Fibonacci ratio applied to the recent 77% decline. It’s the 23.6% retracement level that also corresponds to a previous low (point C) posted in late October last year. That’s why some profit-taking is possible on the current levels.
However we expect the price to move further up on the near-term. First, the 23.6% is typically the weakest ratio as traders usually pay more attention to the 38.2% and the 50% ratios when preventing a further retracement. Second, the technical tools are not indicating an overbought configuration. The Momentum indicator peaked in late March at the end of the first rebound wave (blue ellipse), and corrected during the consolidation phase of the price action in April. It has recently found some support on its 100-line and has curved upward. It means that a new momentum is building.
The RSI is moving up of course but has not reached yet its overbought area.
Consequently a further bullish development is likely on the medium-term. The next objective may be the level of $77 which is the next Fibonacci ratio. On the downside, there is a support level at $47.