Bullish news for the oil markets led the trading action on Monday, as the confirmation of the EU embargo plans for Iran were met with renewed threats by that nation to close the Strait of Hormuz. The result was a firming of the recent uptrend in Brent Crude Oil futures to set the stage for a possible sharp rally as the week progresses. Chart analysis reveals the major signal for a continuation may be a run at the top of the Flag chart pattern identified by Autochartist and illustrated here.
The Flag appears on the 240-minute emerging patterns platform. It scores high on all internal readings, reflecting the very well defined structure of trading within this zone. Monday's push higher brought the price close to the resistance at $111.50 per barrel before a shallow retracement near the close. Higher trade on Tuesday could complete the test of resistance and poise the market for an upside breakout.
A move above the top of the Flag chart pattern would generate a higher price forecast on the Autochartist platform. This forecast may call for a move well above the previous swing high of $112.80 if momentum buying accompanies the breakout. Although the price may also stall and remain range-bound within the Flag pattern for several more sessions, the delineation provided by the pattern should give traders an early warning that a major trend shift is underway if the breakout occurs.
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