After four consecutive weekly doji candles, crude oil closed the month of May with a monthly doji / spinning top candle, enhancing the war between the bulls and bears over the near-term trend of black gold. Of May's four weekly candles, the first two saw bearish pressure and closed near the lows, whereas last week's candle saw bullish pressure and closed near the high.
The successful retest of the double bottom's neckline, around 54.00-56.50, has proven that there are still more buyers who believe that crude's price is attractive enough at these levels. The question, of course, is whether they outnumber the sellers, who believe that 60 is too expensive for crude oil.
On the daily chart, the four weekly doji candles form a descending channel pattern which could be part of a bullish flag motif. If, on a daily basis, price closes above the upper trendline, we can expect a move up towards 64.80, 69.20 and even 74.00. None of these levels is a true supply zone, and the fast, sharp drop on the monthly and weekly charts from the levels of 105-107 hasn't left any traces of real supply zones, so there is no clear target for the move up, except for what was mentioned a month ago. On the other hand, closing below the aforementioned neckline, and particularly closing below the 54.00 level, may open the way for more losses toward 49.00 and then 44.00-45.00.
A possible hint about crude oil's potential move up can be seen via the USD/CAD chart. The Canadian dollar is a commodity currency, which means it usually mirrors crude oil's trajectory. Bearish signals from the USD/CAD pair—meaning the CAD gains against the USD—could support bullish signals on the crude oil chart.
As can be seen on the monthly chart below, April's monthly bearish engulfing candle was formed at the monthly supply zone of 1.26-1.30—a classic bearish price action, which proves that there are plenty of sellers around 1.27-1.28.
On the weekly chart we can see additional bearish engulfing candles, which shows how strong the sellers are around 1.24-1.28. This last supply zone, at 1.2450-1.2650, could serve as the base for another leg down toward 1.2070 and even lower. To go short, just wait for a daily reversal candle with a nice risk:reward ratio (stop-loss above 1.2650, targets around 1.2250 and then 1.2100.)
