SINGAPORE: Brent oil may stabilize around a pivotal support of $28.31 per barrel, and then bounce towards a resistance at $42.11 over the four weeks.
The support is provided by the 86.4 percent Fibonacci retracement on the rise from the December 1998 low of $9.55 to the July 2008 high of $147.50.
In January, oil briefly pierced below this support and closed high above it. A long-shadowed hammer was formed on the monthly candlestick chart, which is a typical bullish reversal pattern.
The hammer itself may not be good enough to confirm a bullish reversal of the downtrend from the Aug. 28, 2013 high of $117.34. It needs to work together with a white candlestick, which is still developing and will complete at the end of this month. The bullish divergence on the daily RSI does indicate a good chance of a white candle to form.
A Fibonacci retracement analysis on the fall from the May 6, 2015 high of $69.63 to the Jan. 20, 2016 low of $27.10 indicates oil could at least retest a resistance at $37.14, the 23.6 percent level.
A break above this resistance could even lead to a gain to $43.35, the 38.2 percent retracement.
A break below $28.31 may cause a loss to $20.
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