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On Tuesday, the price of crude oil continued to compress as the day\u2019s trading range was the smallest since the early-April interim swing high, which was followed by a sharp drop to $55.23. At the time of this writing, crude is set to end the day\u2019s session with a narrow range inside day with a low of $60.92 and a high of $62.12.<\/p>\n
A decline below the low of the day has Monday\u2019s low of $60.68 as the next lower target, followed by Friday\u2019s low of $59.54. On the upside, there is initial potential resistance around Monday\u2019s high of $62.74, followed by last Thursday\u2019s high of $63.45. Thursday\u2019s high just about completed a 50% retracement of the latest downswing.<\/p>\n
An intraday chart (not shown) provides more clues about what price levels to watch. There has been one sharp rally from the lows so far followed by a pullback that completed a little more than a 50% retracement before crude began to strengthen. Once the current consolidation phase is complete it looks like there could be a continuation of the rally from the bottom.<\/p>\n
There has been only one leg up from that $55.23 low so far, and at least a second leg up would better complete the counter-trend rally. A breakout above today\u2019s high could begin the next leg up. However, that depends on support being retained at or above last Thursday\u2019s low of $58.86.<\/p>\n
The recent decline was the largest bearish correction in crude oil since May 2023, and it ended with a sharp rally and one-day bullish reversal with a strong closing price. It seems like there is a good chance that the subsequent rally may eventually test resistance around the 20-Day MA, currently at $66.18, or the 50-Day MA, now at $68.29. Since support was seen at the bottom of the trend channel, there is a chance that resistance may be tested around the top channel line. Nevertheless, channel analysis is one piece of technical evidence for at least a second leg up for the rally.<\/p>\n