WTI Jumps Back Above 40, but Can it Maintain?

WTI Crude Oil Price Analysis

WTI crude oil prices put in a strong jump on Friday to erase earlier-week losses but, on net, this week’s price action in WTI closed as a doji.
A few weeks ago saw the build of an inverse head-and-shoulders with the neckline defined at the 40-handle: That led to a topside breakout as WTI filled the gap left over from the March sell-off. But, since then, its been largely back-and-forth price action.
Another pattern has built in WTI crude oil price action as a rising wedge has formed with that 40-level again playing a key role, looked at in greater detail below.

WTI Crude Oil Continues to Battle at $40, Can Bulls Take Control?

Starting off with the longer-term, it was a fairly quiet week in oil, oddly enough. The weekly chart is currently showing a small doji around that same $40 handle that came into play a few weeks ago. I had written about the setup then, as a short-term inverse head and shoulders pattern had built in, basing off of that 40-level for the neckline, and that soon opened the door to a quick breakout that filled the gap left from the March sell-off. But – after that gap was filled, buyers took the side exit and price action pushed back-below the 40 level. And, here we are, three weeks later, and price action is still entangled with that 40-handle.

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On the below weekly chart, notice this week’s doji followed the resistance interaction, around that gap-fill area from late-June. Since that gap has been filled, oil prices haven’t really shown much trend, at least yet.

WTI Crude Oil Weekly Price Chart (Next Contract Month)

Chart prepared by James Stanley; CL2 on Tradingview

Oil Recovers with Late-Week Rally, Remains in Rising Wedge

This week there’s another formation of interest at-play, and that’s a rising wedge pattern that, again, is building with an assist of resistance from that 40-handle.

The primary difference from this rising wedge and the inverse head and shoulders looked at previously is one of directional expectation: The inverse head and shoulders will often be approached in a bullish manner, looking for the horizontal resistance to finally give way to bullish potential, as highlighted by the higher-lows constituting the right side of the shoulder (from the head).

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The rising wedge, however, will often be approached from a bearish vantage point, looking for the same lack of enthusiasm that bulls have shown around tests of highs or at resistance to, eventually, take-over to allow for a push through support. We discuss the rising wedge along with numerous other formations in the chart patterns portion of the DailyFX Education section; and for next week, this can keep the door open for bearish themes in oil prices.

WTI Crude Oil Eight-Hour Price Chart

Chart prepared by James Stanley; CL2 on Tradingview

Technical Forecast for WTI Crude Oil: Bearish

The forecast for next week will be set to bearish for WTI Crude oil, largely due to the build of the rising wedge as the 40-level and the 41.34 Fibonacci level have continued to exhibit resistance.