Thursday's Market Minute: Crude Oil's Potential Pause?

Crude Oil futures are surging during the past few months, with the contract up about +39% from the start of the rally on Jun. 28 and briefly breaking into fresh yearly highs of 95.03 yesterday evening. Given production cuts from Saudi Arabia and Russia, the fundamental situation may be difficult for a bearish outlook – but the charts reveal we may be at a potential inflection point for the uptrend. 

The upside move brings price near the double-top highs from October and November around 93.50, but the /CL contract has backed off a bit from this resistance point this morning. Consider as well that the Relative Strength Index (known as the RSI, which measures momentum of price change) is showing bearish divergence. This means price is making new closing highs above the previous peak, while the RSI is making a lower high.

Looking at the past few years, the previously mentioned 93.50 area is a key price level at which price has halted numerous times both to the upside and the downside, so this could be a resistance point where we may see a pause, and for which a move beyond would be noteworthy.

If that does happen, consider using the yearly Standard Deviation Channel study to project a potential resistance point. The +3 SDC currently comes in just above the 96 mark, so that’s one potential ceiling to watch. To the downside, watch the old highs from Sep. 18-19 near 92.40.

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