Crude Oil Technical Analysis – Dead cat bounce or the start of a rally?

Crude Oil Technical Analysis – Dead cat bounce or the start of a rally?
Crude Oil Technical Analysis – Dead cat bounce or the start of a rally?

Crude oil has been on a steady downtrend since the end of the retaliations between Iran and Israel that eventually marked the top in the geopolitical risk premium. The selloff continued as we got some noise from the cease-fire negotiations between Israel and Hamas. More recently, we started to get news about speculations that OPEC+ could extend the voluntary output cuts into year end. The group meets on June 1st.

Crude Oil Technical Analysis – Daily Timeframe

Crude Oil Daily

On the daily chart, we can see that crude oil fell below the trendline yesterday but eventually rallied back above it leaving behind a hammer candlestick pattern. We have a resistance zone around the $81 level where we might find the sellers stepping in with a defined risk above the resistance to position for a break below the trendline with a better risk to reward setup. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the $85 level.

Crude Oil Technical Analysis – 1 hour Timeframe

Crude Oil 1 hour

On the 1 hour chart, we can see more clearly the resistance zone with a downward trendline adding some extra confluence. If we get a pullback into the upward trendline around the $78.50 level, we can expect the buyers to step back in with a better risk to reward setup to target the break above the $81 resistance.

Upcoming Catalysts

Today we get the latest US Jobless Claims figures while tomorrow we conclude the week with the University of Michigan consumer sentiment survey. It’s unlikely that we will see major changes to the market’s expectations though, so the next big event to watch will be the US CPI next week.

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