The crude oil price advanced recently. The market bounced after a triangle as a reversal pattern formed at the $60 area. What followed, though, looks like a rising wedge pattern, a typical formation during the terminal impulsive wave phase of flat formation according to the Elliott Waves Theory.
As such, the bias for the crude oil price is bearish, although we should see some proof of life first. More precisely, the market should break and close below the lower edge of the pattern.
One reason for a move lower could come from the ongoing negotiations between the Western powers and Iran. While sluggish, optimism exists that a new deal may be reached. If that is the case, the new Iran supply is estimated at 1.5 million bpd, a big enough quantity to shift the balance of supply and demand.
Two key areas caught the eye of the technical trader. One is a move above the recent highs, as it should trigger more follow-through. Another one is a move back to and below the $60 level.
Judging by the rising wedge formation, the bias is that the market will drop first. As such, bears may want to wait for the market to close below the lower edge before going short with a stop at the highest point in the wedge formation and a take profit at the $60 level.
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