Brent Crude – Momentum Lacking Despite New High

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.

Brent Daily

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.

Brent 4hr

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.

Brent 1hr

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam