(Bloomberg) -- Oil may break free from its trading range in the third quarter and rally to $70 a barrel, according to technical analysis by Shuaa Capital PSC, the United Arab Emirates’ biggest bank. Oil in New York is in a “bottoming process,” bound in a range between $38 and $55, according to Nabil Effat, Dubai-based Shuaa’s chief technical analyst. Crude futures reached a year- to-date high of $54.66 on March 26.“Clearing the $55-a-barrel resistance should trigger more buying with a target area of $65 to $70 a barrel,” Effat said in a telephone interview from Dubai.
A rally would target the $70, close to the oil’s 200-day moving average, currently $69.96.
Analysts use moving averages to identify trends and find support and resistance levels for prices.Prices will also be drawn toward $76.28, a 38.2 percent retracement of last year’s plunge from oil’s record at $147.27 to a low of $42.40 in December.The 38.2 percent threshold comes from the ratio between numbers in the Fibonacci sequence. The ratio, sometimes known as the golden mean, is used to find support or resistance as prices retrace rallies or declines between previous highs and lows.
Oil is likely to remain in a range between $45 and $55 a barrel over the next couple of months as it completes its “normalization process” before “being able to break to the upside,” Effat said. Oil for June delivery rose 2.4 percent to $51.55 on the New York Mercantile Exchange last week.
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