Is crude oil poised to make a giant leap higher in price? What would the world look like if crude was to rally 50% from current prices? Below looks at crude oil over the past 30 years and highlights that it has a big test of resistance in play.
For the majority of the past 30 years, crude oil has traded inside of rising channel (1). The sharp decline earlier this year in crude saw it hit the bottom of the rising channel, near the $25 level. Since hitting support, it has rallied higher to now test a parallel channel line.
Crude oil is facing a very important test of resistance right now at (3), which happens to be the top of a bullish ascending triangle AND channel line (2) at the same time.
If crude breaks out, the measured move of the ascending triangle suggests that crude could rally to the $75 level, about 50% higher than today's price.
What crude oil does with the top of the ascending triangle will have a large impact on the energy sector, the broad stock market (SPY) and bonds (NASDAQ:TLT).
At this time, premium members are long the energy sector --with tight stops -- due to the patterns above. The risk-on trade in stocks does NOT want to see crude oil fail to breakout and turn weak.