Will Crude Oil Futures Break Out of Consolidation? | RJO Futures

January 26, 2017 6:28AM CST

March WTI crude oil futures have finally shown the first signs of breaking out of its tight 2017 consolidation range.  In what has been choppy trading into 2017, the oil market is looking primed to break it’s now $2.00 range as stops are likely being hit above 53.67 1/20/17 highs.  The fundamental picture has likely been price into the short term, with the 1/25/17 EIA Petroleum Status Report finding a 2.8 M barrel build in crude oil inventories.  The recent rally in crude oil futures is a bit counter intuitive to the recent reports, so it’s likely the market is weighing in on comments from President Trump at this time.

From a technical perspective March crude futures are performing in line with our prior futures cast, where I was cautiously bullish on crude, with support clearly causing a sideways compression in the market. March oil prices still remain above prior highs that were made on 11/22/2016 at 50.83, and formed the bottom of a supportive price band which first proved as support on 12/7/2016 at 51.80.  This price band has continued to offer support for oil futures into the New Year, and now I am expecting the market to test prior highs at 56.24.  The 100% equal legs Fibonacci extension also has proven supportive at 52.04, a measurement that is traditionally used to find support and resistance level in a market.  This same Fibonacci extension has a technical upside target of 58.74, and a 100% projection of the range crude futures have been consolidation between projects to 57.20 if a break of highs is realized.  I expect resistance to the upside first at the 100% projection of 57.20, followed by the 58.74 projection in the coming weeks.

In my opinion, crude oil futures are still holding key supportive price levels and have possibly begun to break out of a consolidation range in this market.  We can expect to see follow-through to the upside, however, a pullback to retest the broken trend line resistance (now as support) could offer a chance for those wishing to be long, to position themselves for a move higher.  This support area would likely be on a test of the 53.00 handle, and below 52.50 could signal that the range between 56.18 and 51.65 remains.  With larger time-frame reversal to test towards the 60 handle still in play, I believe there is still a bias for a rally out of this range.  Breaking, and closing on a daily basis, below 51.65 may signal for a larger pullback and test of the 50.00 handle.

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