Technical Update - Volatile Crude Oil awaits breakout from corrective pattern; Indicators suggest bearish break with 10-15% downside potential Technical Update - Volatile Crude Oil awaits breakout from corrective pattern; Indicators suggest bearish break with 10-15% downside potential Technical Update - Volatile Crude Oil awaits breakout from corrective pattern; Indicators suggest bearish break with 10-15% downside potential

Technical Update - Volatile Crude Oil awaits breakout from corrective pattern; Indicators suggest bearish break with 10-15% downside potential

Commodities 3 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

  • Brent and WTI Crude oil forming symmetrical pattern
  • Break out needed for direction
  • Indicators suggest bearish break out with 10-15% downside potential
Crude oil has been quite volatile lately without clear direction. Range-bound trading between 75 and 87 for Brent and between 72 and 85 for WTI.
We need to zoom out to see what is actually going on with Crude oil.

On the weekly chart Crude oil is forming a symmetrical triangle-like formation for both teh Brent and the WTI future.

A breakout is needed for trend direction, and that usually occurs ¾ of the way to the apex (i.e., where the two converging lines meet). Crude oil is currently just about halfway. A breakout now could hurt the distance the price could move.

However, both oil future contracts are trading below all weekly moving averages, with only the 200 weekly moving average rising. The 21, 55, and 100 moving averages are all declining.
That is an indication of an underlying bearish trend short-to medium-term but could indicate oil may move higher in the longer term, supporting the view of a bearish breakout with limited price movement before a bullish comeback.

When a price breaks out of a symmetrical triangle, the minimum distance the price should travel is for a bullish breakout to the top of the triangle and for a bearish breakout to the low of the triangle, but the price could move much farther

Brent Crude oil:
Brent is currently in a bearish trend (lower lows [LL] and lower highs [LH]) and has been for the past 4–5 months.

A bearish breakout will be confirmed below USD 75.05, with downside potential short- to medium-term to the lowest level of the triangle and strong support at around 69.90. However, a push down to support at around 64.60 could be seen, as indicated by the two red arrows.

For a bullish breakout, a break of the upper falling trendline is required and will be confirmed by a close above 87.95. If that scenario plays out, there is upside potential to around 97.70, indicated by the green arrow.

However, if there is no bearish breakout for the next few weeks and Brent instead bounces from the lower rising trendline, forming a new lower high (a new lower high lower than the previous lower high indicated by LH? and the blue arrows), it could last weeks before a triangle breakout.

The strength indicator is currently testing the 40 threshold. A close below, combined with a Brent oil close below 75.05, will confirm the bearish scenario. An RSI bounce from the 40 threshold could be an indication of the “staying in the triangle” scenario for longer
Source all charts: Saxo Group

Levels for WTI Crude oil:
Bearish breakout will be confirmed below 71.67 with downside potential to 64.00–61.80.

Bullish breakout, as the current picture looks, is confirmed above 84.52, but the upper falling trendline will be broken well before that if the bullish scenario is to play out.
Upside potential to around 95, with resistance at around 87.67.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.