WTI crude oil price traded higher yesterday despite a bigger-than-expected build in crude oil inventories. CFDs of WTI crude oil closed at $32.43 after opening at $30.82.
According to the Energy Information Administration (EIA), the number of crude oil held in storage last week rose by 7.9 million barrels. It was expected to have dropped by 2.5 million. This news should have been bearish for crude oil price because it implies that demand for crude oil price will soon weaken given the surplus of oil. However, this was not the case. It would seem that the commodity has grown stronger as more and more economies take steps in easing lockdown restrictions.
On the 4-hour time frame, it would look like commodity formed a potential triple top chart pattern. This is characterized by a market getting rejected at a price level thrice. For crude oil, this price was the $33.00 psychological handle. In order for the chart pattern to be completed, crude oil price needs to fall to the neckline support around $29.89. When you enroll in our free forex trading course, you will learn that this is widely considered as a bearish reversal indicator. A strong close below the neckline could mean that there are enough sellers in the market. It could then mean that WTI crude oil price will soon fall to support around $23.81.
On the other hand, a strong bullish close above $33.00 would invalidate the chart pattern. It could instead suggest that there are still buyers in the market and we could soon see WTI crude oil price rally to $46.13 where it could test the 200 SMA on the daily time frame. It’s also worth pointing out that on the daily time frame, the commodity has been consolidating after a sharp rally. Consequently, a bullish flag chart pattern has formed. This is considered as a bullish continuation indicator. A strong close above the high of May 26 at $33.44 could mean that the commodity may have room to trade higher.More content