Despite the fierce drop in oil last Friday, I am still of the opinion that the trend remains up and prices are going higher. As long as the oil price remains above $59, I would argue that bulls are in charge. My swing target is $70 where I will look to reevaluate. The chart above depicts the trend channel that oil has been trading in since breaking out from the lows.
The chart below shows the 34d EMA, 55d EMA, 144d EMA, and 233d EMA all rising. The oil price remains above all 4 averages. You will also note that support is holding on the 14 period RSI.
The next chart is a simple depiction of the inverse head and shoulders formation that oil formed coming out of the December lows. In theory, the distance from the neckline to the head of these formations represents a target length for price once it breaks the neckline. In this case, that would imply a move to $70, which aligns with the 78.6% retracement of the entire move.
Lastly, the Fibonacci analysis below depicts a recent breakout and (thus far) successful retest of the the 61.8% retracement.
One of the arguments against a bullish view on oil is the lack of reinforcement from the oil stocks. However, while the move in $XOP (as one example) has been muted, the price is still up more than 20% YTD, the trend remains up, and support is holding. I would have liked to see the 38.2% Fib line hold last week, so I’m watching closely to see if price can recover in the coming days.
Charts made with Optuma Software
Based on current technicals, I still remain bullish oil unless we see a break of the channel in oil futures or a definitive break of the support line in oil stocks. Big picture, as long as we are above $59/barrel the bulls are in charge.