Introduction
Since our previous analysis on January 2, 2025, crude oil futures (CL) have rallied as anticipated, breaking above the consolidation range and climbing toward key resistance levels. With today’s price action hovering near critical technical zones, let’s analyze the probabilities for the next directional move in crude oil futures.
Technical Analysis Overview
Key Developments Since the Last Analysis
- Crude oil surged past the $70.24 pivot level, reclaiming the 50-day SMA ($69.98) as support.
- Price is now trading just below the 200-day SMA at $75.34.
Support and Resistance Levels
Resistance Levels
- $75.34 (200-day SMA and downward trendline): A critical zone that has capped price action. Breaking above this level would signal a significant bullish breakout.
- $75.28 (R2 pivot): Minor resistance just below the 200-day SMA. A breach of this level increases the probability of testing the $78.54 (R3 pivot) resistance zone.
Support Levels
- $73.50 (R1 pivot): Immediate support from the most recent breakout zone.
- $70.24 (central pivot): A key psychological and technical level that now acts as a major support zone. This level aligns with the lower range of recent consolidation.
- $68.46 (S1 pivot): If a pullback occurs, this area will likely provide strong support, aligning with the 50-day SMA.
Indicators Analysis
Relative Strength Index (RSI)
- The RSI currently sits at 57.55, signaling bullish momentum but not yet overbought. This suggests room for further upside before hitting extreme levels.
- A continued rise in RSI above 60 would confirm strengthening bullish momentum.
Moving Averages
- The 50-day SMA ($69.98) has turned upward, signaling improving medium-term sentiment.
- The 200-day SMA ($75.34) remains flat, indicating long-term sentiment is still neutral to bearish unless this level is decisively broken.
Bullish Scenario: A Breakout Above $75.34
- A breakout above the 200-day SMA and trendline resistance at $75.34 would likely open the door for a rally toward the $78.54 (R3 pivot) and potentially higher levels.
- Clearing the downward trendline would mark a shift in market structure, leading to a resumption of the long-term uptrend.
- Watch for RSI confirmation above 60 to strengthen the bullish case.
Bearish Scenario: Rejection at Resistance
- Failure to break the $75.34 resistance zone would likely result in a pullback toward $73.50 (R1 pivot) or deeper to $70.24 (central pivot).
- A break below the $70.24 pivot would invalidate the recent bullish momentum, exposing crude oil to a retest of $68.46 (S1 pivot) or lower.
Trade Ideas
Bullish Setup
- Entry: Long positions on a breakout above $75.34.
- Targets:
- First target: $78.54 (R3 pivot).
- Second target: $80.00+, extending to psychological levels if bullish momentum accelerates.
- Stop-Loss: Below $73.50 to minimize risk.
Bearish Setup
- Entry: Short positions on rejection near $75.34, targeting a pullback.
- Targets:
- First target: $73.50 (R1 pivot).
- Second target: $70.24 (central pivot).
- Stop-Loss: Above $76.00 to manage risk.
