Crude oil's ‘golden cross’ could point to big gains ahead

A classic technical gauge may be pointing to further gains for crude oil.

West Texas Intermediate crude oil just posted a "golden cross," a technical formation that occurs when an asset's shorter-term moving average crosses over its longer-term moving average. In this case, crude oil's 50-day moving average crossed over its 200-day moving average.

This activity in the charts can often signal strong bullish momentum, said Bill Baruch, president of Blue Line Futures.

Crude oil futures traded up to a high of $55.22 per barrel on Wednesday, though Baruch said on CNBC's "Trading Nation" that he would look for a weekly close above this price to encourage a move up to $59 per barrel.

Ultimately, Baruch said he is watching for a close above $55.25 per barrel. Crude oil was trading near its highest level since July 2015 on Wednesday.

Adding to his bullish outlook is the backwardation seen in the oil market, which occurs when a future contract's price trades below the current spot price. This signals tightening in the supply, Baruch said, and is also an encouraging sign.

Crude oil settled slightly lower on Wednesday, paring gains made earlier in the session, at $54.30 per barrel.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more

Connect