WTI crude oil might be in for a strong rally, as price is forming an inverted head and shoulders reversal pattern on its 4-hour chart. Price is already starting to break above the neckline resistance at the $70 per barrel major psychological mark.

If this keeps up, crude oil could be in for a rally that’s the same height as the chart formation. This spans around $8 from $62 per barrel to $70 per barrel.

However, the 100 SMA is still below the 200 SMA to signal that the path of least resistance is to the downside. In other words, resistance is more likely to hold than to break. Then again, price has broken above both indicators as an early indication of bullish pressure.

Stochastic is indicating overbought conditions, though, so buyers could be feeling exhausted and willing to let sellers take over.

WTI crude oil is drawing support from news that China is ramping up its purchases of the commodity, easing supply glut concerns. Recall that the OPEC agreed to stick to its production increase of 400K barrels per day from last month to December, but the additional output could be consumed.

The upcoming NFP release might impact market sentiment and commodity prices in the next few hours, as it would set the tone for Fed policy expectations. Fed head Powell confirmed that they would likely taper asset purchases by the end of the year but reiterated that it would be a dovish move, keeping risk appetite in play.

A weak NFP reading could force the central bank to push back its taper plans, which would be even more bullish for riskier assets. A strong result, on the other hand, could keep traders wary of rate hike speculations.

Analysts are expecting to see a gain of 750K in August after the earlier 943K increase.