After two weeks of declining prices from $66 to $58, oil is bouncing back above $60 and we take a look at the charts to see if there is a chance that oil has bottomed and a new upward move has started. My view is that oil may have bottomed at its $58 low. Oil has retraced almost 38% of the rise from June lows. This is a shallow retracement and an indication that the bullish trend could still have more upside. Toward $69-$70 or even $78.50-$80.
Taking a closer look at the 4-hour chart we see Oil prices have broken out of the bearish channel. We could see a back test of the broken channel and even a pull back towards the 61.8% Fibonacci retracement. A move above $61.60 would be a very bullish sign. Oil is making higher highs and higher lows since the $58 low. So it is important for bulls to not break below it.
If we break below $58 I expect oil prices to fall toward $55-$56. That area should be the reversal area for the next leg upwards towards $80. The 38% Fibonacci retracement of the rise from June 2017 is at $57.25. This would be my target. Oil is at a phase where I would not focus on the short side rather on finding a good risk reward setup for the upside. Either near $59.50 or around $57 if we break $58. Longer-term I’m bullish, waiting for a confirmation of a trend reversal.