Brent Rebounds And Hits Resistance At 74.00; Still Within Range

Brent crude oil traded higher yesterday after it hit support near the 72.45 barrier. However, the price was halted by the 74.00 zone and then, the liquid retreated somewhat. Brent has been trading within a sideways range between 72.45 and 75.00 since the 18th of April. The only exception was a spike above 75.00 on the 30th of April, but the price was quickly rejected near 75.55 and returned within the range. Thus, we prefer to stay neutral for now with regards to the short-term outlook.

That said, bearing in mind that yesterday’s rebound came after the price hit the lower end of the range, we see the case for some further recovery. A break above 74.00 could confirm the case and could pave the way towards the psychological zone of 75.00, which is also the range’s upper bound. However, in order to start examining whether the picture has turned back positive, we would like to see a clear move above 75.55, a level marked by the shadow peak of the 30th of April. Such a break may see scope for more upside extensions, perhaps towards the 76.75 resistance zone, defined by the inside swing low of the 14th of November 2014.

Looking at our short-term momentum studies, we see that the RSI turned somewhat up from near its 50 line, while the MACD lies above its trigger line, near zero. It could obtain a positive sign soon. These indicators corroborate our view that the price could trade north for a while more, at least towards the 75.00 key barrier.

On the downside, a dip below 72.45 may signal the downside exit of the aforementioned range and could set the stage for declines towards the 70.25/70.70 support area, which currently coincides with the upside support line drawn from the low of the 8th of March.

Article written by Charalambos Pissouros, Senior Market Analyst at JFD Brokers