Two weeks ago, I published a report titled “Is Another Oil Spike Ahead?” in which I explored a scenario where crude oil surges to $150+ per barrel, a move I argued is not nearly as far-fetched as it sounds given that oil remains relatively cheap in real terms. Since then, oil prices have eased amid speculation of an imminent peace deal between the U.S. and Iran, though they have rebounded over the past two trading sessions. In this update, I want to show why another oil price spike isn’t off the table.
In my original report, I pointed out that triangle patterns were forming in both West Texas Intermediate (WTI) crude oil, the primary U.S. benchmark, and Brent crude oil, the main international benchmark. Triangle patterns like these are typically continuation patterns, meaning that once a breakout occurs, the asset tends to resume its primary trend, which in the case of oil is higher.
Although oil pulled back in late May, that does not invalidate my original thesis and simply expanded the lower boundary of the triangle. Importantly, no buy signal has been triggered yet, as I noted in my original report that confirmation would come only with an upside breakout from both the triangle pattern and the overhead resistance zone.
The chart of WTI crude oil still shows a clear triangle pattern forming, with the $112 to $120 zone as the key resistance to watch. A decisive breakout above both the triangle and this resistance zone is required to confirm the next leg higher.
You can track WTI crude oil prices on Finviz.com.
To learn more about support and resistance zones, I recommend reading my two-part tutorial on the topic (Part 1 and Part 2).
Brent crude oil’s triangle pattern is still forming as well, and a breakout above both the pattern and the $116 to $120 resistance zone would signal that oil is likely about to move much higher. For maximum confirmation, I would ideally like to see both WTI and Brent break out in tandem, which would significantly strengthen the signal.