After a strong rally in crude oil prices and energy stocks in the first half of 2018, it looks like crude oil price is taking a breather. The important question now is where does crude oil price go from here.

Two months ago, when we wrote our article  Are Energy Stocks a Buy Yet?, we mentioned the following:

Crude oil is currently in the resistance area towards the middle half of the ascending channel. If the price can break above that resistance and successfully backtest the support annotated with the dotted line, then crude might head higher. Right now the crude might benefit from the weakness in the US dollar so investors will need to watch how the crude will clear or break below the resistance in the 65.50 area.

The answer to where does crude oil prices go from here is not in the headlines about US Oil supply, nor in how oil giants are fleeing Iran and Saudis planning to increase oil prices. Those headlines can be of value for day traders who benefit from short term volatility. Investors on the other hand want to find answers in charts because they want to see trends. Therefore, we will look into WTIC’s daily and weekly chart to understand the following:

• Is crude oil on an uptrend still?
• Is crude oil’s rally that started in 2017 likely to continue in 2018?

Crude Oil’s Daily Charts Shows That The Price is at an important Support Level

We believe there are two important points to note about Crude oil price’s performance:

• 65.50 was an important resistance level as mentioned above. That resistance was broken and what we are witnessing now is the backtest of that key level. It is important that it holds to become the new support for the possible upcoming move upwards.
• The price needs to hold within the rising channel below and recover quickly.

Crude Oil’s Weekly Chart Confirms a Backtest is Taking Place

When looking at the weekly chart, we see that after breaking above the resistance line annotated in purple, crude oil price is retracing. If it bounces off that key support line, we have a successful back test and prices are likely to go higher from there. Otherwise, the prices might dip to the next support levels in the 54 area.

So where does crude oil go from here? Probably higher as long as that seems to be the direction with the least resistance.

Is crude oil on an uptrend still? As long as it remains above 65 USD, the uptrend is intact. In fact, the support area is within the 65.5 to 62 range and as long as that support area holds, crude oil’s rally that started in 2017 is likely to continue in 2018.