Crude Oil Technical Analysis: WTI Falling Wedge - Can Bulls Force A Reversal

(MENAFN- DailyFX) Oil Talking Points:

• Oil prices remain a hot button issue across global markets.
• WTI crude Oil has spent the better part of the past three months funneling lower, taking on the form of a falling wedge. Such formations are often tracked for bullish reversal potential.
• The analysis contained in article relies on price action and chart formations . To learn more about price action or chart patterns, check out our DailyFX Education section.

Crude oil continues to consolidate. I had looked into the matter two weeks ago , highlighting a couple of key technical items that remain in-play today.

For support – I was looking to a zone of price action support that's been in-play over the past decade. It's a wide zone, to be sure, but given price action in WTI over the past decade , it's pretty clear that this is a key range of prices for oil producers. This zone helped to set support when prices were scaling-higher from 2011-2014. And then it became a zone of resistance in 2018 and again in early-2021, just before the Q4 breakout really started to hit. And even when that did happen, the 85.90 level helped to mark the October high and, so far this month, is helping to mark the August 2022 low.

That 85.90 level came into play last Tuesday, so about a week after I had written the prior technical article on WTI . But, it remains in-play today as support. At the very least, this illustrates a clean example of prior price action resistance-turned-support .

Chart prepared by James Stanley ; CL1 on Tradingview

Going down to the daily chart in crude oil and a falling wedge becomes prominent. This is a formation that shows between two unequally-angled trendlines . Resistance remains at the more aggressive trendline, and this illustrates greater aggression from bears when price is at or near resistance. Support, on the other hand, shows a weaker-angled trendline, and this often appears when there's a major spot of support on the way. That major spot of support could make it more difficult for fresh bearish exposure to trigger (given the implication of support possibly stalling bearish continuation).

Falling wedges are often tracked with the aim of bullish reversals – hypothesizing that the same lack of aggression from bears at or near support – can continue to evolve until sellers eventually take a step back, allowing for a counter-move to take-hold.

Chart prepared by James Stanley ; CL1 on Tradingview

From the four hour chart below, we can see that bulls haven't exactly taken control of matters yet. But, we can also see where they've so far been able to help cauterize support around the lows at that 85.90 spot, and this equalized price action is already some element of change from the aggressive sell-off that was driving for much of the past two months.

A break above short-term resistance at 91.24 would also entail a break of the falling wedge formation, thereby opening the door to greater bullish potential.

The next major level above that is the same zone around the 95.00 psychological level that was serving as support-turned-resistance through July and into early-August.

Chart prepared by James Stanley ; CL1 on Tradingview

--- Written by James Stanley, Senior Strategist, DailyFX.com & Head of DailyFX Education

Contact and follow James on Twitter: @JStanleyFX

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