Brent Crude – Triangle Top at Breaking Point

Having spent much of the day paring yesterday’s gains, Brent crude has taken off again this afternoon and finds itself back at the top end of the range it’s traded in this year.

The result of the consolidation this year has been an ascending triangle forming which is quite a bullish set up, regardless of whether it’s found in an uptrend or downtrend. A breakout in this set up quite often comes around the two thirds point which is where price action is currently approaching.

That doesn’t mean that we will see a break out right away, or that it will definitely come to the upside, but the chart is starting to look a little bullish. For example, the most recent rally, which started at the beginning of April is showing no signs of exhaustion on either the stochastic or MACD.

We also broke above the 100-day SMA earlier this week for the first time since July last year which suggests a bullish shift in sentiment. Of course, this in itself doesn’t mean it’ll break higher now, but it does add support to the bullish set up that we now see.

Brent Daily

The correction today has left us with a pretty interesting set up. If the pair breaks through the year highs and out of the consolidation period, it could open up a much larger move to the upside.

One of the good things about these setups is that they give a possible price projection. It is believed that if you take the size of the opening of the triangle – $17 – an project it above the top of the formation, it gives you a possible price projection. This would be around $79.25 which lies between two possible resistance levels.

If this level holds once again, today’s low will be a very interesting level and it would effectively act as the neckline of a double top, if it is completed. For it to be completed, the neckline would need to be broken.

Again, the good thing about these set ups is that that provide possible price projections to the downside. It is believed with double tops that if you take the size of the formation and project it lower, it gives you a possible downside target. Again, these brings price back to 59.38 which coincides nicely with previous resistance.

Brent 4hr

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.