Crude: Symmetrical triangle nears apex

• Crude coils within triangle pattern

• Prices below 50-day EMA

• Incoming EIA could trigger volatility

• Prices may test upper bound of triangle pattern 

• Key levels of interest at $74.35 & $70.83

Crude oil is bound within a symmetrical triangle pattern which began on November 30th, 2023.

However, it may be set for a breakout as prices coil towards the apex of the technical pattern.

Over the past few days, oil prices have been choppy despite escalating geopolitical tensions in the Middle East. The global commodity is trading around $72.82 as of writing and could see fresh volatility due to the incoming Energy Information Administration (EIA) report today.

It is worth noting that the American Petroleum Institute (API) reported a small increase in crude inventories on Wednesday. A similar report from the EIA that shows a buildup may inspire crude bears, (those looking to see crude oil prices decline).

Furthermore, the International Energy Agency (IEA) is also scheduled to publish its monthly market snapshot which could also contribute to the expected increase in volatility.

Worthy of note is that breakouts can be in any direction, with statistics slightly favoring an upward breakout in this scenario.

According to Thomas Bulkowski, in his famous book, “The Encyclopedia of Chart Patterns”, upward breakouts of a symmetrical pattern in a downtrend,

· ranks 13 out of 20 similar patterns.

· has a breakeven failure rate of 23%

· has a 36% percentage chance of meeting its price target.

Yesterday, January 17th saw a hammer on the daily time frame bounce off the upper sloping trendline of the pattern (which has acted as support since December 13th, 2023)

Crude prices on the daily timeframe may be on its way to test this coil pattern's downward-sloping trendline (resistance zone).

This resistance area coincides with the 50-day Exponential moving average at $74.35.

A breakout to the upside will mean crude prices have to close above this confluence (of the 50-day EMA and the downward-sloping trend line).

In the event of a breakout, the following resistance levels may be tested.

· $76.05: The 100 Fibonacci Retracement level

· $78.89: A significant price area

· $81.27: The 161.8 golden mean Fibonacci level.

The Fibonacci retracement levels are taken from December 13th low at $67.67 to December 26th high at $76.05.

Continuous weakening demand and a failure to appropriately price in new geopolitical tensions in the Middle East may see crude prices break through the following price levels as it aims for lows below $67.67 (its most recent low posted on December 13th)

· $70.83: The upward-sloping line of the symmetrical pattern (which coincides with the 38.2 Fibonacci retracement level)

· $69.60: The 23.6 Fibonacci retracement level