Weekly Crude Oil Follow-through Selling

Market Overview: Crude Oil Futures

The market formed a weekly Crude Oil follow-through selling on the weekly chart. The bears want a reversal from a lower high major trend reversal, a double top bear flag (Apr 12 and Jul 5) and from around the top of the large triangle pattern. The bulls hope that the 20-week EMA will act as support.

Crude oil futures

The Weekly crude oil chart

• This week’s candlestick on the weekly Crude Oil chart was a bear bar closing near its low with a long tail above.
• Last week, we said that traders would see if the bulls can create a retest of the July 5 high, or will the bears be able to create a follow-through bear bar and a pullback towards the middle of the trading range (20-week EMA area)?
• The market attempted to form a retest of the prior high from midweek onward but lacked follow-through buying. Friday reversed the move closing below last week’s low.
• The bears see the strong rally simply as a buy vacuum within a trading range and a retest of the prior high (Apr 12).
• They want a reversal from a lower high major trend reversal, a double top bear flag (Apr 12 and Jul 5) and from around the top of the large triangle pattern.
• They managed to create a follow-through bear bar this week which increases the odds of a deeper pullback.
• The next target for the bears is the 20-week EMA. They want the market to close below it.
• Previously, the bulls managed to create a breakout and follow-through buying trading above the 20-week EMA.
• They had a 5-bar bull microchannel which means persistent buying.
• However, the bulls have not yet been able to create a breakout above the triangle pattern.
• The bulls hope that the 20-week EMA will act as support.
• Since this week’s candlestick is a bear bar closing near its low, it is a sell signal bar.
• Odds slightly favor the market to trade at least a little lower.
• Traders will see if the bears can create another follow-through bear bar or will the market trade slightly lower but stall, closing with a long tail or a bull body.
• The middle of the large trading range is an area of balance and can be a magnet. It may be tested soon.
• 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.
• Sidenote: The ongoing turmoil in the Middle East can cause volatility in energy prices.

The Daily crude oil chart

• The market traded lower earlier in the week but reversed higher on Wednesday. Thursday traded slightly higher but lacked follow-through buying. Friday formed a big bear bar closing near its low.
• Last week, we said that because the sideways-to-down pullback has just begun, the market may still be in the pullback phase early in the week. Traders will see the strength of the pullback.
• The bulls got a strong breakout trading far above the bear trend line, testing the triangle top.
• They got another retest of the July 5 high on Thursday but it was a lower high.
• They see the current move simply as a pullback testing the breakout point (May 29) following the strong rally.
• They want a reversal from a wedge bull flag (Jul 10, Jul 16, and Jul 19). They want the 20-day EMA to act as support.
• They hope to get a retest of the July 5 high followed by a breakout with follow-through buying.
• The bear sees the prior rally as a buy vacuum and a bull leg within a trading range, testing the prior high (April 12).
• They got a pullback from around the top of the triangle. They want a retest of the June 4 low.
• They want a reversal from a double top bear flag (Apr 12 and Jul 5) and a lower high major trend reversal (against the April high)
• They see Friday’s big bear bar as a reversal from a smaller double top bear flag (Jul 12 and Jul 18).
• They need to create consecutive bear bars closing near their lows and trading far below the 20-day EMA to indicate they are back in control.
• So far, the pullback has a lot of overlapping price action and has the shape of a wedge bull flag.
• However, the big bear bar closing near its low Friday indicates strong selling pressure.
• Traders will see if there are follow-through selling early next week.
• If the bears get strong consecutive bear bars, it could swing the odds in favor of the bear leg beginning.
• Or will the market trade slightly lower but stall and reverse up from a wedge bull flag?
• For now, odds slightly favor the market to trade at least a little lower.
• The market is trading in the upper third of the trading range which can be the sell zone of trading range traders.
• The top of the triangle can be a resistance area.
• Poor follow-through and reversals are hallmarks of a trading range.
• Sidenote: The ongoing turmoil in the Middle East can cause volatility in energy prices.

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