Crude oil declined on Wednesday only to shoot up with vengeance yesterday, exceeding the previous August highs. Still, crude oil declined a bit before the session was over, so many investors are wondering if the rally is already over – is this the case?

Most likely – no. Let’s take a closer look at the chart:

WTIC crude oil daily chart

After closing the short positions in crude oil on August 1, we were waiting for a bullish confirmation and in August 9 Oil Trading Alert, we wrote the following:

From today’s point of view, we see that the situation developed in line with the above scenario and crude oil extended gains yesterday. With Monday’s increase, the commodity not only increased to our upside target, but also climbed higher and closed the day above the lower border of the black declining trend channel. In this way, light crude invalidated earlier breakdown under this short-term support, which in combination with buy signals generated by the daily indicators and invalidation of the breakdown under the 200-day moving average and a weekly closure above the long-term black declining line suggests further improvement in the coming days. If this is the case, and crude oil moves higher from here, we’ll see an upward move to (at least) the upper border of the black declining trend channel (currently around $46.90) in near future.

In short, the above remains up-to-date, despite yesterday’s upswing. The rally was sizable from a day-to-day perspective, but crude oil didn’t reach even the closest of the more significant resistance levels. In our opinion – at this moment – it is most likely that crude oil will move to $50 or so and even if it doesn’t, a move to a least $47 is still most likely as we don’t have anything important enough to stop the black gold before it moves to this level.

Summing up, Tuesday’s move lower turned out to be a correction within a short-term move higher and yesterday’s rally just confirmed it. The short-term outlook remains bullish as the key resistance levels were not yet reached.