SINGAPORE (Dow Jones)--Crude oil may continue to probe its upside this week, but in the absence of fresh buy signals, don't look for the market to break out of its downtrend channel just yet, technical charts say Monday.
Spiking more than 5% Monday on a weak dollar and as a Chinese fiscal stimulus plan fueled some broader economic optimism, benchmark New York Mercantile Exchange light sweet crude may appear to have eased into a sideways trading band in recent days, but it remains vulnerable to further losses.
As this column correctly called last week, the market twice tested the psychologically important $70 mark. More significantly, it also surprised on the downside by slipping briefly under $60 on Friday.
Last week's bottom was lowest trade since March 2007, pushing oil nearly three-fifths below its July 11 all-time high of $147.27 and leaving the market 36.7% lower in value than a year earlier.
With an oversold RSI reading on the weekly continuation chart and with daily MACD ticking higher each day since a bullish crossover Oct. 30, there's a chance for Monday's recovery to be sustained.
Still, beyond this, it's fair to say there's not much else to snap prices out of a downtrend channel going back some four months.
In coming days, look for minor resistance at a recent intraday high of $65.50 before a possible test of the middle Bollinger Band on the daily chart, a moving objective around $67.55 as of Monday.
The bulls will need to settle above this target before they can retake control; the market hasn't recovered since slipping below the band on Oct. 2, the last time oil changed hands above $100.
They may do better by taking things one step at a time and aiming to close out Friday's session above last week's $61.04.
On the downside, the first line of defense comes in at $60, then Friday's low of $59.97, with further support near $58.20.
It may be early days, but the market is looking susceptible to losing its bottom, with $56.10 and $49.90 inscribed on key milestones ahead, the charts say.
At 0930 GMT, Nymex crude futures for delivery in December traded at $63.35 a barrel, up $2.31 or about 3.8% in the Globex electronic session.
