Everyone is wondering these days how long the oil drop could be and when it could start increasing again? Personally, I don’t have this answer because the global risk is high amid an unfolding economic crisis.
In this article, we’ll talk about Brent Oil price and some important levels, about a potential reversal around $20 per barrel. The oil price has accelerated the sell-off as a consequence of COVID-19 outbreak and aggressively spread, the global economy was damaged by this epidemic, but the price could not drop forever, there is a moment when it climbs higher again. When will that moment be?
Technically, Brent Oil maintains a bearish outlook after it has ignored the lower median line (lml) of the ascending pitchfork and the median line (ML) of the descending pitchfork. The price has passed below the 27.52 static support, but this could still be only a false breakdown.
If the price closes below this downside obstacle, the next downside target is seen at the 50% Fibonacci line. Personally, I believe that this dynamic support line could stop the downside movement and it could reject the price, which it will try to come back higher, towards the median line (ML) of the descending pitchfork.
You can see that the price has increased within the black ascending pitchfork, it has jumped above the upper median line (uml), but it has failed to stay there signaling a potential drop. I’ve drawn an orange descending pitchfork to catch a potential downside movement, Brent Oil has retested the inside sliding line (SL) of the descending pitchfork, the bearish engulfing has signaled a significant drop.
Brent Oil has gapped through the confluence area formed at the intersection between the median line (ML) and the lower median line (lml) confirming a further drop. The downside movement could resume if the price closes and stabilizes below the 27.52 level.
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Oil will come back to reach the median line (ML) if it will fail to reach the 50% line, or if it will make only a false breakdown below this dynamic obstacle. A Pin Bar (Hammer), Bullish Engulfing, or any other reversal pattern will signal that the bearish movement is finished and that another leg higher will develop. It could find a strong demand around the $20 level, near 50% Fibonacci line of the descending pitchfork.
The major resistance will remain at the median line (ML), only a valid breakout above this line will confirm a larger upside movement, it is premature to talk about this as long as the price is trading in the red.
If you’ll take a look in 2008, you will notice that the price has dropped as much as 36.20 as an effect of the 2007 – 2008 financial crisis, but it has increased aggressively from the fresh start of 2009 and it has climbed as much as $128.
I believe that the oil price will increase significantly again when this pandemic is over and when the global economy recovers after this hit.