On Tuesday, crude oil (NYMEX:CLK14) gained 0.22% as stronger-than-expected U.S. economic data weighted on the price. Thanks to these solid numbers, the commodity closed the day above the medium-term resistance line, but how reliable this breakout is?
Yesterday, the Labor Department showed that the consumer price index rose 0.2% in March (above expectations for a 0.1% increase), while the on-year rate rose 1.5% in the previous month, beating estimates for a 1.4% gain. Additionally, the core consumer price index (without volatile food and energy items) rose 0.2% last month (also above forecast of a 0.1% gain), while the on-year core consumer prices index rose 1,7%, beating expectations for the index to remain unchanged at 1.6%. Thanks to these better-than-expected numbers, the commodity moved higher, but reports that crude shipments will resume from key Libyan ports capped the gains.
Looking at the weekly chart, we don’t see any changes at the first glance. However, crude oil broke above the medium-term resistance line based on the September and March highs (which is also the upper line of a triangle) yesterday. According to theory, such price action should trigger further improvement and an increase to around $108, where the long-term resistance line (marked with red) is (you could read this bullish scenario in our previous Oil Trading Alert). However, taking into account the size of the upswing it’s too early to say that this breakout is reliable.
To see the current situation in crude oil more clearly, let’s zoom in on our picture and move on to the daily chart.
NEXT PAGE: Short- and long-term views.