Brent crude oil edged north yesterday, hit resistance near the high of April 30th, at around 72.70, and then it pulled back. Nevertheless, the setback remained limited near the 71.65 zone, from which the black liquid rebounded again. In our view, the recent recovery suggests that the April 25th – May 6th slide was just a decent corrective phase of the prevailing uptrend and thus, we would expect the bulls to stay in the driver’s seat for a while more.
We would expect them to challenge the 72.70 hurdle once again, and if they prove to be strong enough to overcome it, then we could see extensions towards our next resistance at 73.25, defined by the inside swing low of April 25th. Another break, above 73.25, may carry more bullish implications and perhaps allow the price to accelerate towards the 74.05 zone, marked by the peaks of April 23rd and 24th.
Looking at our short-term momentum studies, we see that the RSI, already above 50, has turned up again, while the MACD lies above both its zero and trigger lines, showing signs that it could also shift back north. These indicators suggest that the upside momentum may be picking up again and support the notion for further near-term advances.
On the downside, we would like to see a clear dip below 71.15, a support marked by the inside swing high of May 14th, before we start examining whether the bulls have abandoned the battlefield, at least for a while. Such a dip may allow declines towards the 69.90 zone, the break of which could lead to a test near the low of May 13th, at around 69.25.
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