Crude Oil has been retreating despite the heightened geopolitical tensions between Israel and Iran in the Middle East. The fundamentals remain supportive, with a pickup in economic activity, although expectations for rate cuts continue to dwindle. The technical analysis will help us determine the next move for CL futures.
Daily Timeframe
On the daily chart, Crude Oil was stuck in a consolidation phase, but the recent 7% drop has frightened the bulls. The price is currently testing the key 50% Fib level at $81.31, which should give some support. Price has plunged below the 21-day moving average after falling 7% since last Friday. If the buyers manage to defend this support, it could set the stage for a continued move higher.
Weekly Timeframe
The weekly chart is a scary one to look at if you have a long position. The chart shows a relatively weak uptrend with no real impulse moves, and after the formation of an evening star pattern, bears are targeting the support zone at $70. We need to be cautious in our views, however, because the recent rally has been primarily driven by geopolitical conflicts, especially in the Middle East. With Israel stating they will retaliate against Iran, it could send shockwaves through the market once more, likely leading to higher Oil prices.
My View
I am cautiously bullish on CL. I see this recent pullback as a possible entry point on shorter time frames if we see a flattening of the price. We need to see support step in, and once we have confirmation of a support zone form, say, on the hourly chart, that could be the time to enter into a long trade.
Remember strict risk management rules and always trade your trading plan.
