Oil Prices are Headed Higher

Ed Ponsi

  • U.S. Crude Oil Touched $40 per barrel on Monday
  • It was the highest price for oil in three months
  • Charts say oil prices will continue to rally

I have good news and bad news. First the bad news: oil prices are headed higher. 

The good news is this - if oil prices are recovering, then so is the economy. We saw evidence of this in Friday's spectacular jobs report.

Oil prices reached multi-year lows in 2020, due to lack of consumption caused by the pandemic. However, prices are now reaching 3-month highs, and according to the charts, the rally isn't over. 


Crude oil has formed an inverted head and shoulders pattern, which can be viewed as semicircles on the chart. This is a bullish reversal pattern, meaning it changes the trend from bearish to bullish. 

The neckline of the pattern, represented by the red dotted line, has been breached. This is a classic breakout, and based on the size of the pattern, I expect crude oil to reach at least $50. 

More evidence of the bull trend can be seen in crude oil's moving averages. Crude oil's 10 day moving average (green) is above its 20 day moving average (blue), which is above its 50 day moving average (red). This is the so-called "proper order" for a bullish trend. 

Here's the bottom line: crude oil prices are headed higher, and that's a good thing.