Brent Crude Completing an Inverted Head and Shoulders Pattern

Brent Crude Oil 4H chart 8:30PM EDT 7/15/2012

Brent crude oil prices have been rallying since mid-June, and cleared the consolidation period in July, as seen in the 4H chart. The 4H RSI was able to pop up above 70 late June, early July, and has remained above 40 during the consolidation, reflecting intact bullish momentum. Last week, it popped up to 70 again, suggesting a continuation of this bullish momentum as price action break above a consolidation pattern.

In the daily chart below, we see a market attempting to complete an inverted head and shoulders pattern as it attempts to push above 103.00 handle and the 103.22, 38.2% retracement level, where the neckline also reside.

Also note that the RSI in the daily chart is at 60. If the previous bearish attempt from 127.06 to 88.49 is to continue with strong bearish momentum, we should find resistance soon, maybe in the form of a false breakout from the bottoming pattern. However if the RSI reading rises above 60, the market is likely in it for more correction to the upside in the context of a consolidation if not in the context of a reversal.

The conservative bullish outlook (in context of consolidation), has upside toward the 61.8% retracement level 112.33. Before that, the 50% retracement at 107.78 appears to be in confluence with a declining trendline, and should also be monitored for possible resistance.

Brent Crude Oil Daily chart 8:35PM EDT 7/15/2012

Fan Yang CMT is the Chief Technical Strategist, trader, educator and a of the main contributors to FXTimes - provider of x News, Analysis, Education, Videos, Charts, and other trading resources.

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