Oil continues to ascend within the upward-sloping channel

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West Texas Intermediate crude oil regained a bullish momentum and managed to establish a new high at $81.58, which marks the highest value in over four months. Additionally, RSI, MACD, and Stochastic all moved higher on the daily chart. These developments are positive for oil and bolster a bullish case in the short term and medium term. However, while it is possible that oil might reach $85 per barrel (or perhaps even $90, depending on the global economy, oil supply/demand dynamics, and the situation in the Middle East), we are skeptical about such high price tags as $100 per barrel in the coming months. In our opinion, the United States will continue to ramp up its production against OPEC, which is trying to balance the market by cutting its own production quotas. Furthermore, the declining industrial and manufacturing production in Europe and the United States is likely to continue holding a lid over rising oil prices. Consequently, at the moment, we see very limited upside for oil.

Illustration 1.01

Illustration 1.01 shows the ADX’s daily chart, which reflects the trend’s momentum. Yellow arrows indicate a temporary decline in momentum ahead of the OPEC’s monthly report and subsequent awakening after the report.

Illustration 1.02

The image above shows the daily chart of USOIL and simple support/resistance levels derived from past peaks and troughs.

Technical analysis
Daily time frame = Bullish
Weekly time frame = Bullish

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DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.