Brent crude oil traded higher last week, and on Thursday, it managed to overcome the key resistance (now turned into support) area of 115.60. Today, the liquid opened and traded higher, with the bulls looking willing to keep marching north. With all that in mind, we will consider the short-term outlook to be positive.
In our view, the bulls may continue climbing higher, until they challenge the 120.75 barrier, which is marked as a resistance by the high of Mar. 25. They may decide to a break after hitting that zone, thereby allowing a decent correction, but if they manage to recharge from above 115.60, we may see another, stronger, leg north. That leg may take the liquid above 120.75 and target the 122.90 level, marked by the high of Mar. 24, the break of which could aim for the psychological zone of 125.00.
Shifting attention to our short-term oscillators, we see that the RSI, although above 70, has turned down again and looks ready to fall back below 70, while the MACD, even though above both its zero and trigger lines, shows signs that it could start topping as well.
On the downside, we would like to see a clear break below 111.70, marked by the low of May 24, before we start examining whether the bears have stolen all the bulls’ swords. Such a break could initially encourage declines towards the 108.50 barrier, marked by the low of May 18, the break of which could carry extensions towards the low of May 19, at around 105.82, or towards the low of May 12, near 104.90. If neither territory is able to stop the slide, then we may experience extensions towards the low of May 11, at around 101.60.