Crude Oil prices hit their three-year high after OPEC+ decided to stick to their output plan. OPEC+ agreed in July to boost output by 400,000 barrels per day (bpd) each month until at least April 2022 to phase out 5.8 million bpd of existing production cuts.
However, even if one looks solely at the technical charts, they have been buoyant as ever; a stage for a major rise was set at the beginning of 2021 itself as per the long-term monthly charts of Brent Crude Oil.
The analysis of the Monthly charts suggests that the up move in the price above $70 in June 2021 caused the price to break above the 13-year old falling trend line resistance.
Again, in January 2021, the RSI, which is also a lead indicator had broken out from a pattern by penetrating the falling trend line much ahead of the actual price breakout taking place. This has set the stage for a stronger price move over the following months.
Once the price broke out and went above the 13-year old falling trend line pattern resistance, it resisted to the 200-Month Moving Average which presently stands at 75.24. Following a consolidation for nearly three months near that important resistance point; Brent Crude price finally also went past the 200-Month MA while it started this month.
Although the month has just started and the bar is obviously incomplete, the Brent Crude price will continue to enjoy a strong and favorable technical setup so long as it keep its head above $ 75 mark.
The analysis of the Weekly Chart for Brent Crude offers a visual delight to any market technical. It is exciting to see how the prices followed very basic and classical concepts of technical analysis. Over the past five years, it has taken support at trend lines, resisted extended trend lines, fallen out of pattern formations, and right now, it has taken out a major tripe-top resistance on the weekly charts when it moved past $75.
Moving past $75 level stays important from a technical perspective as well. This is the level that also coincided with the breakout level on the higher monthly time frame charts. Also going by the weekly charts, the technical setup for crude oil remains buoyant so long as it stays above the $75-mark.
The most immediate price targets that can be expected following the current price breakout can be placed at $85. Once again, this level matches the level on both monthly and weekly charts. If the present breakout stays in force for a couple of weeks, Brent crude is all set to test $85 levels followed by the $100-mark.
This analysis will stay valid and in force so long as Brent crude stays above the $73-75, failing which it would stay negated.
Milan Vaishnav, CMT, MSTA,
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)