Crude Oil: Potential Bottom in as OPEC Cuts, Fed Offer Bullish Fuel
Crude oil closed last week in the positive territory for the first time after 7 consecutive weekly falls. Prices finally found some support as demand concernes eased.
After a bright start to the new week, oil prices had again turned lower at the time of writing in early European session, casting some doubts over bullish signals that had emerged last week.
Still, the weakness may attract dip-buyers later in the day or week, in light of the apparent bullish reversal in oil prices last week.
Before discussing the macro factors, let’s start by looking at the charts first.
Despite a weaker start at the beginning of this week, we may have already seen a potential low in oil prices last week judging by the technical signals that were formed then.
But some upside follow-through is needed to confirm that reversal, which was always needed but especially in light of a weaker start today.
As per the weekly chart, WTI formed a hammer candle on the weekly time frame. The hammer pattern is a single-candle bullish reversal pattern. It is often found at the end of a downtrend.
The opening price is usually below the close, while there is a long wick that extends lower, which is at least twice as big as the shorter body of the candle.
But all you need to know is that this pattern usually precedes more gains as it shows a reversal from previous selling pressure to now buying pressure.
The reversal happened as oil prices dipped more than $2 below the key $70 handle, but ultimately closed the week about $2 above this psychologically-important level.
The fact that this hammer candle was formed around the rising 200-week average makes it even more interesting from a bullish point of view.
What the bulls will want to see next is some traction
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