In Wednesday’s US pre-open report (US Open – Markets Rebound in Light Data Session) I highlighted that Brent is looking bullish despite the fact that it has been in consolidation for most of the month. Well things have just taken a bullish turn and I think we could be about to see a break higher.
Brent bounced off the 55-day simple moving average and 50 fib level – 17 March lows to 6 May highs – yesterday, with the candle forming a hammer, albeit one with a larger body than I would like to see.
Today’s rally looks likely to complete a morning star formation, barring a sell-off into the end of the session, which given the level it has bounced off suggests further gains could lie ahead.
Moreover, the stochastic has broken the downtrend which is another signal that momentum has taken an upward turn.
Should we see a break above the consolidation, I would become quite bullish and based on the size of the move into the flag ($60.50 (22 April lows) – $69.22 (6 May highs)) we could see a move towards $75.
Here it could run into resistance with it roughly coinciding with a previous level of support and the 233-day SMA. Further resistance may be found along the way around $67.33, $71.25 and $72.80, which were key levels during the decline towards the end of last year.