Brent crude oil tumbled yesterday, breaking below the 59.60 support zone, a move that also signaled the downside exit out of the symmetrical triangle that had been containing the price action since the 20th of November. On top of that, the black liquid continued trading south today, briefly breaking the 58.00 hurdle to trade at levels last seen back in October 2017. Although the price slightly rebounded thereafter, bearing in mind that it continues to trade below the lower end of the aforementioned triangle, we will consider the near-term outlook to have turned somewhat negative again.
If the bears are strong enough to take charge again soon and push Brent back below 58.00, then we may see them heading towards the psychological zone of 55.00, which provided strong support back on the 6th and 9th of October 2017. That said, before that happens, we see a decent likelihood for the price to recover a bit more, perhaps to challenge the 59.60 barrier, or the triangle’s lower bound, from underneath.
We base our view on the fact that the price was quick to recover back above 58.00 after breaking it, and also on our momentum signs. Although the MACD remains well below both its zero and trigger lines, the RSI hit support near 30 and turned up again. Both indicators detect negative momentum, but the rebound of the RSI enhances our view for some more upside before the bears decide to shoot again.
Now, in case we see the price returning back within the triangle, we will switch to flat. Even if the bulls manage to break the upper bound of it and the 62.05 barrier, we would like to wait for a while more. We prefer to wait for a decisive break above 64.75, a resistance marked by the peak of the 21st of November and the inside swing low of the 13th of the same month, before we start examining the case of a newborn near-term uptrend. Such a move is likely to bring Brent oil above the 200-EMA for the first time since the 17th of October and is likely to pave the way for the 67.80 zone. Another move above 67.80 could encourage the bulls to put the 69.30 zone on their radars.
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