Brent crude’s strong rally into the end of last week continued on Monday, climbing to $59.39 before running into the same barrier that has twice halted its attempt over the last few weeks.
It is still difficult to determine what kind of consolidation pattern this is, a continuation or reversal. The higher lows certainly suggest the downside move has lost all momentum, but that doesn’t in itself mean a reversal is on the cards as we often see with flag, ascending wedge and pennant formations.
It does for now appear to have failed at $59.39 though, with the following 4-hour candle failing to make a new high and ending as a hanging man. This is technically a bearish candle but in my view is far from convincing due to the rally into the close.
For a bearish bias to resume, I need to see price action make lower highs on the 4-hour chart. This is not a guarantee that a ceiling has been hit but it does suggest that the bears are wrestling for control and potentially getting the upper hand.
A move back to the ascending trend line could follow, between 54.70 and 55.00, as the period of consolidation continues.
Should we see a break above today’s highs which would see it again trading at a more than one month high, 62.00 – 62.30 would strike me as the next clear resistance. The break of the 100-day simple moving average, the first time it’s traded above here since July last year, is a red flag for me which suggests further upside could be on the cards.
This break of the day’s high would indicate a more bullish bias in the markets, potentially prompting a move into the 62.00 – 62.30 highs. An early signal of this move could come from the break above the triangle on the 1-hour chart, which is nearing a breakout. Although it should be noted that a break below could still result in an equally bullish flag or descending wedge, thereby only delaying the bullish move.
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