Oil Bottoming Signals Strengthen Across Brent and WTI

What to Know

• Brent and WTI show early bottoming signals.
• Key support zones are holding after deep retracements.
• 200-day moving averages remain major resistance.
• Higher swing lows could trigger another advance.
• Breakout confirmation is the next key signal.

Bottoming Signals Emerge Across Oil Benchmarks

Oil markets are attempting to confirm corrective bottoms. Both Brent crude oil and WTI crude oil are showing similar technical patterns, suggesting that strong support has likely been reached and that another leg up from key support may be beginning soon. Whether these emerging bullish signals are confirmed will likely determine the next significant move for both benchmarks. 

Brent Tests Former Resistance as New Support

Brent crude reached a corrective low of $70.90 last week while completing a 78.6% Fibonacci retracement of the prior advance at $72.12. That price zone previously represented resistance along a downtrend line that marked the upper boundary of a multi-month corrective formation in the form of a bullish falling wedge. The current pullback has now tested the former significant resistance area as support, with that support reinforced this week by a one-week bullish reversal signal triggered above last week’s high of $75.71. A weekly close above that high will confirm the bullish reversal.

This week’s higher weekly low of $71.69 establishes near-term support, while the high for the week was $81.27. Notably, that high successfully tested resistance near the prior swing low of $81.53 from March 10. In addition, the advance attempted to break out above the 200-day moving average at $79.72. However, that moving average continues to act as resistance, as Brent closed near the average on Wednesday and Thursday’s high also encountered selling pressure around the same level. 

Resistance Remains, But Bullish Setup Persists

The continued recognition of resistance near the 200-day moving average keeps the short-term downward intact and raises the possibility that this week’s high marks a lower swing high. Nonetheless, given the potential significance of the support zone, short-term weakness is anticipated to find support above the trend low and lead to a higher swing low. If that occurs, it could set the stage for a second leg up from the low and a rally toward higher targets. 

A key upside resistance zone is indicated by the falling 50-day moving average near $92.36. Before reaching that level, the next upside target is a prior swing low at $87.16 from April. Although a period of consolidation could follow the bullish reversal attempt, recent volatility since the wedge breakout also leaves open the possibility of another sharp leg higher. 

WTI Mirrors Brent’s Technical Structure

The overall technical structure of WTI crude oil is similar to Brent crude. A long-term bullish breakout of a falling wedge pattern triggered on March 2, resulting in a sharp advance of approximately 77% to a peak of $119.54 only five days later. The subsequent bearish correction from that peak led to a retracement low of $67.73 last week and triggered a one-week bullish reversal this week following a rally above last week’s high of $72.37. A 78.6% Fibonacci retracement was completed during the decline at $68.54, suggesting the retracement may have been completed. 

Support Confirmation Holds the Key

Once long-term resistance is shown to have become support, the broader uptrend may be ready to reassert itself. There has been only one leg up since the wedge breakout in early March. Following the completion of the correction, another leg up is possible, unless it is replaced by a consolidation phase. This week’s initial advance found resistance at a high of $76.71 and generated a lower swing high, thereby maintaining the downtrend structure of lower swing highs and lower swing lows. An attempt to reclaim the 200-day moving average near $75.03 failed, as resistance was confirmed by weakness on Thursday. 

Nonetheless, given the potential significance of support, a higher swing low may result from the pullback, and if confirmed, it would set up the next bullish signal for a continuation higher. Upside targets are defined by prior swing lows and highs, including $79.23, $81.94, and the 50-day moving average at $87.81 and falling. As with Brent crude, confirmation that former resistance has become support would strengthen the case that the recent corrective lows have established an important foundation for the next advance. 

For more daily forecasts and in-depth analysis on Brent crude, and West Texas Intermediate (WTI), visit our Commodities Forecasts section and stay ahead of market trends.