Brent crude has been cruising higher over the last couple of sessions, taking out some significant resistance levels with relative ease along the way and now finds itself trading at a one-month high.
The tests have been coming thick and fast for Brent in recent days and the next one isn’t far behind. The break through $46.50-46.70 was very significant – taking out prior support and resistance, retracement levels and moving average – but the next test could be more significant again.
The next big test will come around $48-48.20. Not only has this been an important level of support and resistance over the last four months, it’s also the 61.8% retracement of the move from the June highs to this month’s lows.
A break above here would send quite a bullish signal, with the next test beyond here coming around $50-51, again another major level of resistance in recent months.
While the 4-hour chart would suggest momentum remains with the bulls, a closer look at the 1-hour chart suggests otherwise.
While we’re not seeing momentum being drained from the move as you can sometimes see, there is a small divergence forming as we approach this key level of resistance.
This divergence isn’t significant enough to fill me with much confidence though and I still want to see a clear reversal pattern on the chart before taking a more bearish stance on this.