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Crude Oil OO Pattern

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Market Overview: Crude Oil Futures

The weekly chart formed a Crude Oil OO pattern (outside-outside) which means the market is in breakout mode. Crude Oil is currently trading around the middle of the large trading range, which is an area of balance. The overlapping price action in the last 3 weeks also indicates that the market is in a tight trading range.

Crude oil futures

The Weekly crude oil chart

Crude Oil Weekly: OO Pattern, TTR, Middle of TR, Crude Oil OO Pattern
  • This week’s candlestick on the weekly Crude Oil chart was an outside bear bar closing below the middle of its range and closing below the 20-week EMA.
  • Last week, we said that the odds slightly favor the market to trade at least a little higher. Traders will see if the bulls can create a follow-through bull bar following last week’s close above the 20-week EMA.
  • The market traded slightly higher on Monday but reversed lower for the rest of the week. Friday broke below last week’s low but reversed higher to close off the low of the week.
  • The bears got the third push down this week completing the wedge pattern (Apr 22, May 8, and May 24).
  • The problem with the bear’s case is that they have not yet been able to create a strong breakout below the bull trend line with follow-through selling.
  • They will need to create consecutive bear bars closing near their lows and trading far trading below the 20-week EMA and the bull trend line to convince traders that the bear leg is underway.
  • If the market trades higher, the bears want the bear trend line to act as resistance. 
  • The bulls want a retest of the April 12 high after the current pullback.
  • They want the 20-week EMA or the bull trend line to act as support. If the market trades lower, they want a failed breakout below the bull trend line. 
  • They want a reversal from a wedge (Apr 22, May 8, and May 24), a micro wedge (May 8, May 15, and May 24) and a higher low.
  • They will need to create strong bull bars trading far above the 20-week EMA to increase the odds of a retest of the April high.
  • Since this week’s candlestick is a bear bar closing below the middle of its range, it is a sell signal bar for next week albeit weaker (prominent tail below) and at a potential support area (bull trend line).
  • The market formed an OO (outside-outside) breakout mode pattern.
  • The bulls want a breakout above while the bears want a breakout below the OO pattern. The first breakout can fail 50% of the time.
  • Traders will see if there is a breakout from either direction with follow-through buying or selling.
  • The 3 overlapping candlesticks trading above the bull trend line also indicate that the bear leg is stalling.
  • If the bears continue to fail to push lower, we could see the market do the opposite and push higher instead in the weeks ahead.
  • Crude Oil is currently trading around the middle of the large trading range, which is an area of balance.
  • The market is in a large trading range (Trading range high: September 29, Trading range low: May 4).
  • Traders will BLSH (Buy Low, Sell High) until there is a breakout from either direction with sustained follow-through buying/selling.
  • Poor follow-through and reversals are hallmarks of a trading range.

The Daily crude oil chart

Crude Oil Daily: Wedge, Embedded Wedge, Middle of TR
  • The Crude Oil market traded slightly higher on Monday but reversed lower for the rest of the week. Friday traded lower but reversed into a bull bar, closing near its high.
  • Last week, we said that traders will see if the bulls can create consecutive bull bars trading far above the 20-day EMA or will the market trades slightly higher but stalls (perhaps around the bear trend line area) and reverses back below the 20-day EMA.
  • The bulls see the current move simply as a pullback and want the bull trend line to act as support. 
  • They want a reversal from a wedge bull flag (Apr 18, May 8, and May 24) and an embedded wedge(May 8, May 15 and May 24).
  • The bulls will need to create consecutive bull bars closing near their highs and trading far above the 20-day EMA to increase the odds of a retest of the April 12 high.
  • The bear got a three-legged pullback (therefore a wedge – Apr 18, May 8, and May 24) trading below the 20-day EMA.
  • The problem with the bear’s case is that they have not been able to create a strong breakout below the bull trend line.
  • They need to break far below the bull trend line to increase the odds of retesting the December low.
  • If the market trades higher, they want the 20-day EMA or the bear trend line to act as resistance.
  • The market formed a small triangle (in the last 3 weeks) which is a breakout mode pattern.
  • So far, the bears have failed to create a strong breakout below the bull trend line. If this continues to be the case, we may see the market do the opposite and trade higher instead within a few weeks.
  • If the market trades higher, traders will see if the bulls can create consecutive bull bars trading far above the 20-day EMA and the bear trend line.
  • Or will the market trade slightly higher but stall (perhaps around the bear trend line area or the 20-day EMA again) and reverse lower?
  • The market is trading around the middle of the large trading range which can be an area of balance.
  • The overlapping price action in the last 3 weeks also indicates that the market is in a tight trading range.
  • Poor follow-through and reversals are hallmarks of a trading range.

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