WTI stages breakout

Crude oil's rally today underscores its recent resilience. Prices surged despite weaker Chinese industrial data, suggesting investors are expecting the oil market to tighten as we head deeper into the US driving season.

Thanks to the rally, WTI has broken its bearish trendline that had been in place since April, finding strong support around $77.80, where the 21-day exponential moving average is present. Today's rally has lifted WTI to its 200-day moving average, just below the $79.50 level. Previously, it had struggled within the $79.50 to $80.00 range.

Considering last week's V-shaped recovery and the subsequent break above the bearish trendline, crude oil bulls are now looking for a move above May's high of $80.63. Achieving this would mark the first higher high and confirm a bullish reversal signal for WTI.

Conversely, if oil prices turn lower in the coming days and fall back below the breakout area around $77.80, the bearish trend would likely resume, leading to further technical selling.

However, the bullish scenario appears more probable to me.

Written by Fawad Razaqzada, market analyst at FOREX.com
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