US crude oil futures are poised to move higher this week to further Friday's strong gains. A steady sideways trend holding the $105 per barrel level established near term support and formed a flag chart pattern in the process. Friday's surge pushed through resistance, triggering a buy signal on the Autochartist 240-minute chart.
The breakout from the flag appears to confirm that this will be a continuation pattern, meaning the initial trend higher which carried the market above $105 prior to the consolidation will continue. The pattern proved very consistent over the 21 candles completed during its formation, and scores high across the board with an overall quality ranking of 9 bars. The 10-bar initial trend reading was a strong indication that the breakout would occur to the upside and this was confirmed by the rally above the $107 resistance level. The projected price target calls for a minimum move to $108.42 per barrel to complete the move. The minor setback going into Fridays close appears to be a classic retest of the top of the flag, which allows traders to enter on Monday at or near the level of the initial breakout. US crude oil continues to severely lag the Brent crude oil futures, which are the predominant contract for the European oil market. With a nearly $20 per barrel discount to Brent, the WTI futures are well positioned to rally. Even a steady price in the Brent contract is liable to encourage speculative buying in the US market, as it is perceived to be underpriced relative to the rest of the global oil market. In the event that US crude cannot sustain the rally from the current level, major technical support remains at the bottom of the flag chart pattern near the $103 per barrel level.
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