Brent oil targets $81.74-$86.74 range in Q4

SINGAPORE: Brent oil may test a resistance at $77.12 per barrel next quarter, with a good chance of breaking above this level and rising towards the $81.74-$86.74 range.

The uptrend from $15.98 observed closely two sets of retracements. One is on the downtrend from $86.74, the other on a longer trend from $147.50.

The resistance at $77.12 is strengthened by a similar one established by a falling trendline.

These resistances stopped the uptrend and triggered a steep correction towards $66.22 last quarter.

With this correction having been almost reversed, the uptrend may have resumed. The trend has been developing within a narrow channel, which suggests a target of $86.74.

The trend followed a long-term correction from $147.5, which ended at $15.98.

The uptrend is expected to at least extend into a zone of $81.74-$97.26, as it has developed far above the 38.2% retracement of $66.22.

The wave pattern indicates the progress of a wave e, which is supposed to be roughly equal to the wave a. Based on this assumption, the wave e may travel close to $97.26.

It is not very clear if the resistance at $77.12 could cause the second correction.

Most likely, such a correction would be limited to $70.04, if it occurs.

A detailed study on the daily chart reveals a target of $85.17, the 161.8% projection level of an uptrend from $35.74. Even though oil failed to break the resistance at $77.96 in its first attempt, it is approaching this level again.

Based on this behaviour, the uptrend does not seem to have ended at the July 6 high of $77.84. The pattern from the August 23 low of $64.60 looks like a pennant, which has been confirmed, suggesting a lower target of $80.

Signals on both weekly and daily charts are bullish. Support is at $73.50, a break below which could cause a fall into the $66.29-$70.75 range.

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