Oil is testing resistance. If it breaks through, it could form a new uptrend.
Resistance is a large group of investors trying to sell at, or close to, the same price. At these levels, there is more supply than demand. This is why rallies end when they reach them.
As you can see on the following chart, the $122.50 level has been resistance for oil.
The rally in early March stalled out at this level. It’s been resistance over the past few days as well.
If oil trades and holds above this resistance it will illustrate an important dynamic. It will show that the sellers who created the resistance are gone. They’ve canceled or finished their orders.
With this large amount of supply taken off of the market, buyers will be forced to pay higher prices. This could result in a new uptrend forming.
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