An interesting pattern has been forming on the US Crude Oil futures 240-minute candlestick chart which may be well worth tracking as the 2012 trading year kicks off. The pattern is an Inverse Head & Shoulders, illustrated here on the Autochartist emerging patterns platform.
The market rallied over $9.00 per barrel from the recent lows to eclipse the $100 per barrel price in the final days of December. This rally occurred immediately following a steep decline from the same level, with the u-turn forming the head on the pattern.
Support and resistance levels are drawn at the shoulders and neckline, defining the likely trading range as the pattern comes to completion. Last week's retest of the support at the $98.50 per barrel level confirmed short term strength to set up for a rally back to the resistance at $102.00 for the next leg.
A successful move to that resistance would position the price for an upside breakout which, if it occurs, would likely project a much higher trading range. A failure of support at $98.50 would trigger a downside breakout from the channel formed by this pattern.
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