Crude oil appears like it could be headed for a double top like it did in 2006 before dropping down to $50 in early 2007. Right now it is at the 10 period exponential moving average after breaking the 5 period moving average. The RSI is below 60 after touching 70 in the previous week and touching down on support at that level.

Brief candlestick analysis

Support is at $85.51 (the low of the doji candlestick at the beginning of December 2007) and resistance is at $95.50, the midpoint of last week’s solid red candlestick. The last candlestick is almost a bearish engulfing after following an upper shadow.

Final Thoughts for the Chart

If it breaks the 10 period moving average, the next test will be the 20 period moving average and below that the support at $85.51 (as mentioned above) and $84.47 (the upper shadow in late September). If it breaks support there, it has doubled topped and wound need to drop another $15 to about $70 complete the pattern. Doing that would probably require it to break through the 200 period moving average and the lower Bollinger Band which it has only done twice since 2000 (in late 2001 and after the double top in 2006).

Remember: this technical analysis is provided as a public service so that people start to understand that oil prices go in cycles and that volatility is increasing which means we may see some drops here and there but the trend is upward and for wider swings.