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Crude oil is holding firm around nine-month trading highs, and like many other risk sensitive asset classes, is currently awaiting confirmation about a new US stimulus package. Without a doubt, crude oil’s recent gains could unwind spectacularly if the Republican and Democrat party fail to agree on a new COVID-19 deal, and the US government then goes into a shutdown.
Commodity traders and investors continue to look past some fairly worrying developments over the last twenty-four hours. Republican Senator John Thune hinted that the US government could go into a brief shutdown over the weekend, as the current stopgap funding bill expires at the end of today.
Looking at the other side of the trade, if the new Covid-19 bill is approved and the shutdown is averted, we could obviously see another big push higher in Crude oil prices over the following, with the commodities sector likely to enjoy a strong rally into the 2020 yearly close.
At the moment, crude oil lower time frame technical analysis is showing some fairly compelling evidence that a push above the $50.00 resistance level may be on the horizon.
Equally, higher time frame analysis is also showing a potential bearish price pattern, so we should now look at the technicals in detail for a clearer picture of the path ahead for crude oil in both the short and medium-term.
Crude Oil Sort-Term Technical Analysis
Lower time frame analysis is showing that an inverted head and shoulders pattern has been activated, placing the $53.00 level as a possible upcoming bullish target for crude oil in the short-term.
Should we see positive news coming from the U.S. this weekend I would expect this scenario to take place, with crude oil catching a serious bid on the Monday open, and easily breaking the $50.00 level.
Source by ActivTrader.
My only concern would be the negative MACD price divergence which has formed from the $40.00 level on the lower time frames during the recent explosive rally, which started in October.
Should we see negative news coming from the U.S. this weekend it is certainly possible that this negative price divergence would be reversed, and crude oil could be one of the worst affected asset classes from the potential bearish news.
Crude Oil Medium-Term Technical Analysis
Looking at the daily time chart, two scenarios appear possible. A breakout above the $49.00 level exposes further upside towards the $50.00 and $53.00 level, with major multi-year trendline resistance coming in around the $55.00 level.
Watch out for this scenario to play out, as crude oil traders will possibly be looking to book profits if the mentioned trend line, at $55.00 holds firms. The bearish scenario on the daily chart involves a rising wedge pattern, which traders consider to be an historically accurate bearish reversal patterns.
Source by ActivTrader.
The daily time frame shows that a break under the $46.50 level is required to activate the falling wedge pattern, placing the $44.00 and $40.00 levels as valid downside targets.
More aggressive traders may attempt to sell crude oil at the top of the rising wedge, around the $49.00 level, in expectation of a coming breakout to the downside.
It should be noted that if the price starts to break above the wedge pattern, an equally powrfull bullish rally is likely to take place over the coming days.
