Uptrend for oil intact; $125 is next target: Charts

Has the upward momentum pressure for oil prices disappeared? The NYMEX oil chart seems to have done very little in the past few weeks with the price stuck in a trading range near USD 104 to USD 105.

Still, the two notch debt credit trading downgrade for Spain by SandP - which confirms the continued problems in the euro zone - and the sluggish US. economic recovery, have not been enough to create a downtrend in the oil price. The stability of the oil price is bullish and this confirms the power of the dominant bullish chart pattern on the weekly NYMEX oil chart. The pattern is an inverted head-and-shoulder pattern. Normally these patterns develop at the end of a downtrend and they signal a change in the direction of the trend from down to up. When the inverted head-and-shoulder pattern develops in an uptrend then the analysis conclusion is different. In this situation the inverted head-and-shoulder pattern shows the uptrend will continue. The upside target is now USD 125. The left shoulder of this inverted head and shoulder pattern developed near the low of USD 91 on 2011, July. The inverted head of the pattern develops near USD 78 on 2011 October. The right shoulder of the pattern is created by the rally-and-retreat behavior near USD 94 on 2011 December. The neckline of the pattern is drawn between the high of USD 99 in 2011 July and the high of USD 101 in 2012 January. The distance between the low of the inverted head and the neckline is measured and used to calculate the upside target. The value of the neckline provides a support level. This level has been tested several times in April and has provided a good rebound point. This inverted head-and-shoulder pattern also has a strong historical support level near USD 98. A move to this level is consistent with a continuation of the bullish pattern. The inverted head-and-shoulder pattern shows a continuation of the uptrend but it does not help to decide when the upside target will be achieved. The pattern also does not provide a method to define how the uptrend will develop. This uptrend could move slowly, or it could move rapidly to achieve the USD 125 target level. The most important short term resistance level is near USD 110. This defines the upper edge of the current consolidation activity in April. The consolidation in April has developed a base for a fast moving breakout. A move above USD 110 has a high probability of quickly developing a rally breakout to the USD 125 target. Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders -www.guppytraders.com . He is a regular guest on CNBC`s Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk. Copyright 2011 cnbc.com