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Look out, crude oil traders!

The commodity price is testing a pretty strong support zone. Will the trend resume or reverse from here?

WTI Crude Oil (USOIL): 4-hour

WTI Crude Oil (USOIL) 4-hour Chart

WTI Crude Oil (USOIL) 4-hour Chart by TradingView

Crude oil has been cruising higher in a newly-formed rising channel, with its higher lows and higher highs since mid-December.

Another test of support is taking place, and it looks like a bounce is possible. After all, technical indicators are hinting at the presence of bullish vibes.

For one, the 100 SMA is still above the 200 SMA to indicate that the path of least resistance is to the upside. Also, Stochastic is starting to pull higher after a brief dip into the oversold region.

I’m even seeing a bit of bullish divergence, as the oscillator formed higher lows so far this month while price had lower lows.

If the channel bottom is enough to keep losses in check, crude oil could resume the climb to the upside targets marked by the Fibonacci extension tool.

Bulls might be aiming for the 38.2% Fib near the mid-channel area of interest or the 61.8% extension around the swing high and $82.50 per barrel minor psychological mark.

Sustained bullish momentum could even take the commodity price up to the 76.4% extension at the channel top or $84 per barrel. The full extension is at $86.44 per barrel.

Investors seem to be in the mood for riskier holdings once more, as the Fed signaled a slight shift to a less hawkish stance. Although Fed head Powell clarified that it’s too early to declare victory against inflation, he acknowledged that interest rates might be peaking soon.

With that, businesses and consumers could be more willing to spend, thanks to the prospect of lower borrowing costs down the line. In turn, this could translate to stronger demand for fuel and energy commodities like crude oil.

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