Brent Oil Technical Analysis: Unfolding Dynamics Amid Production Cuts

In today’s technical analysis, we’re focusing on Brent Oil, currently showcasing a fascinating technical setup on its chart. This week initiated with a significant slump in oil prices, a curious occurrence considering the two recent production cuts. The first one, by OPEC+, paradoxically resulted in a long-term drop, while the second, implemented solely by Saudi Arabia last week, incited a positive initial reaction with a bullish gap, only for prices to subsequently plummet.

Examining the chart, we can see that the price has created a rectangle formation. The upper line (blue) of this formation aligns with the 38.2% Fibonacci retracement of the downtrend, and the lower line correlates with the long-term horizontal support at $71.6 per barrel (yellow). The price has been oscillating between these resistance and support levels, with two false bullish breakouts of the resistance (orange) and three precise touches of the support.

Most recently, the price tested the horizontal support yesterday and made a minor bullish bounce. This lack of further decline suggests reluctance for a breakout, and a breach of this rectangle would provide us with a substantial long-term sell signal. Thus, the defense of this horizontal support is pivotal for the buyers.

Although we’ve observed a bounce, it isn’t quite robust enough to constitute a strong buy signal. To consider buying, we’d need more compelling evidence. However, the price’s support defense has crafted an intriguing trading opportunity. Buyers could consider entering as long as we remain above this support, but a breakout would immediately negate this bullish sentiment and trigger a sell signal.

In terms of predictions, I suspect a further downside breakout might be more likely, though it could be preceded by a minor bullish correction.

Source: https://www.axiory.com/analytics/technical-analysis/brent-oil-technical-analysis-unfolding-dynamics-am