The Emerging Double Bottom Formation in Oil Markets

The recent dovish turn by the Federal Reserve has sent shockwaves through the financial markets, particularly impacting the dollar and its related commodities. This significant shift in tone from the Fed, with hints of potential rate cuts next year, has led to a weakening of the dollar and, as a result, a notable climb in commodity prices.

One of the most striking responses to this development is seen in the oil market. Brent oil, which was previously on a downward trajectory towards $72 per barrel—a crucial support level earlier in the year—made an impressive rebound. This resurgence is not just a random spike but aligns perfectly with the lower boundary of a falling wedge pattern (outlined with a black line on the chart).

Adding to the intrigue is the formation of a double bottom pattern in oil prices, indicated by the orange color on the chart. The significance of this pattern lies in its neckline, situated around the $77 mark (highlighted in blue). It’s this specific level that traders are eyeing, as a daily close above this mark could potentially activate a strong buy signal for oil.

While the current market trends paint an optimistic picture for oil, it’s crucial to remember that a definitive buy signal has yet to materialize. The convergence of the double bottom formation with the upper boundary of the falling wedge pattern (the upper black line) is a key area to watch. A breakthrough above this conjunction could very well confirm the bullish sentiment in the oil market.

Source: https://www.axiory.com/analytics/technical-analysis/the-emerging-double-bottom-formation-in-oil-market