• Oil is falling in a descending channel on the short-term horizon. 
• Within the channel it is currently correcting higher, however, it is likely to capitulate and resume its downtrend. 
• Only a decisive break out of the channel would reverse the short-term bearish outlook. 

Oil price is trading higher, exchanging hands in the 79.50s at the time of writing on Friday, as it rises up within a falling channel. 

West Texas Intermediate (WTI) Crude Oil is in a short-term downtrend which, given the old adage “the trend is your friend,” is expected to eventually continue once the current correction has finished. 

US WTI Oil 4-hour Chart

WTI Oil will probably continue rising first, however, given there are no signs yet that the correction is running out of steam. The price might well reach the upper channel line at around $80.00, however, when it gets there it will almost certainly meet tough resistance, and probably reverse lower. 

Oil has broken above the 50 Simple Moving Average (SMA) – a bullish sign – but it has not yet broken above the 100 or 200 SMAs. Oil price would have to decisively break out of the falling channel and the 100 SMA to mark a change of trend and suggest a more bullish technical outlook.

A decisive break would be one accompanied by a long green candle that closed near its high or three green candles in a row that broke above the channel line. 

Such a break, if it were to happen, could see Oil rally to an initial target at roughly $83.10, the Fibonacci 0.681 ratio of the height of the channel extrapolated higher. 

The Moving Average Convergence Divergence (MACD) momentum indicator has risen above the zero-line and is painting green histogram bars suggesting the current up leg is likely to extend. Resistance from the channel line, however, will probably eventually push price back down. The overall bear trend suggests the possibility of Oil falling back down to $76.00 lows eventually.