All trading involves risk. Losses can exceed deposits.
40-year heritage
152,600 clients worldwide
15,000 markets to trade

Does crude’s recent slip point to an impending reversal?

Brent has finally broken out of a multi-month consolidation period. With a bearish wedge pattern set against a long-term uptrend, which will win?

All trading involves risk. Losses can exceed deposits.
Oil pump
Source: Bloomberg

Crude prices have seen an interesting fortnight, finally breaking out of a three-month range, with US inventories first rising then falling, while the OPEC report showed a surprise rise in Saudi production. The picture is muddied by this mixed bag of factors, providing traders with a very fluid and unpredictable environment. However, charts help us look past this jumble of conflicting announcements and so this article will focus on what the charts tell us about the coming days, weeks and months for crude prices.

Long-term

Looking at the weekly chart, we are clearly in an uptrend considering the creation of higher highs and higher lows since the January 2016 low. That being said, there are signs of weakness in this picture. Firstly, we have seen the price trading within a rising wedge pattern, which is bearish by nature. The price has subsequently dropped through trendline support, with this week’s upside largely coming back into that trendline as potential resistance.

Interestingly, we have utilised the 50-week simple moving average (SMA) as support this week, which actually provided absolute low point for the past swing low, back in mid-November. Given that we have broken lower from what was already a bearish formation, this chart looks as though we could see the undoing of crude prices, with a break back below $44.00 the key to signaling the end of this year-long uptrend. 

Brent weekly chart

Short-term

The four-hour chart highlights the fact we are forming a potential bottoming pattern, off the back of a significant sell-off. The key to this coming to fruition would be a break and an hourly close above $53.08. Should that occur, we would be looking towards $53.83 as the next key resistance level to watch.

Brent four-hourly chart

All in all, the key here is that we have begun to see tentative signs of weakness for crude, with a break through long-term trendline support. However, with a long-term uptrend still in play, which will win out - the long- or short-term view?

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Education

  • Benefits and ways to trade

    Find out how exchange traded products (ETPs) combine the best qualities of various investment vehicles. Learn about the different types of ETPs and the diverse range of markets you can trade on.

  • Our platform

    In this section we introduce our trading platform and illustrate the ease with which you can trade CFDs on a wide range of markets. We also cover features such as stops and limits and explain how trading with leverage works.

  • Pricing

    Without shares there could be no stock markets, which are vital to every national economy. Find out how the shares trade enables companies to expand and develop, while providing sources of income to private investors and larger funds.