Crude Oil Retest Dec Low

Market Overview: Crude Oil Futures

The weekly chart is forming a Crude Oil retest Dec low following a minor pullback. The bears want another leg down retesting the prior leg low (Dec 13). The bulls want a reversal from a higher low major trend reversal and a wedge bull flag (Oct 6, Nov 16, and Dec 13). Crude Oil remains in a trading range.

Crude oil futures

The Monthly crude oil chart

• The December monthly Crude Oil candlestick was another bear bar with a long tail below, closing below the 20-month EMA.
• Last month, we said that the odds slightly favor December to trade at least a little lower in the first half of the month. Traders will see if the bears can get another follow-through bear bar. 
• December traded lower in the first half, followed by a pullback (bounce) in the second half of the month. 
• The bears got follow-through selling following last month’s close below the 20-month EMA.
• They got a bear leg from a double top bear flag with the November 2022 high and a lower high major trend reversal.
• They see the market as forming a larger trading range.
• They want a retest of the trading range low (May). However, the two prominent tails below the last two candlesticks indicate that the bears are not yet as strong as they hope to be.
• They need to continue creating follow-through selling to increase the odds of a retest and breakout attempt below the trading range low.
• The bulls see the current move simply as a deep pullback and hope to get a retest of the September high.
• They want the 20-month EMA or the bull trend line to act as support and a reversal from a higher low major trend reversal and a double bottom bull flag (May 4 and Dec 13).
• Since December was a bear bar closing in its lower half, it is a sell signal bar for January albeit weaker (long tail below).
• While January could still trade lower, the Crude Oil market remains in a trading range.
• The market is currently trading in the lower third of the trading range which is the buy zone of the trading range buyers.
• Breakouts from trading ranges fail most of the time, and odds favor the trading range to continue.
• Traders will see if the bears can get another follow-through bear bar. If they do, especially if it is big and closes near its low, the odds of retesting the May low and subsequent breakout attempt will increase.

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 the odds slightly favor the current pullback to be minor and favor at least a small sideways to down leg to retest the December 13 low after the pullback.
• This week traded above last week’s high but reversed lower from midweek onwards.
• The bulls see the selloff to the December 13 low simply as a bear leg within a trading range.
• They want a reversal from a higher low major trend reversal and a wedge bull flag (Oct 6, Nov 16, and Dec 13).
• If the market trades lower, the bulls see it simply as a retest of the prior trend extreme and want a reversal from a small double bottom.
• The bulls will need to create a couple of strong consecutive bull bars, trading above the 20-week EMA to increase the odds of higher prices. 
• The bears got a strong move down trading far below the 20-week EMA.
• The move down is in a tight bear channel. That means persistent selling.
• They want the 20-week EMA and the bear trend line to act as resistance, followed by another leg down retesting the prior leg low (Dec 13). The retest of the December low could be underway.
• Since this week’s candlestick is a bear bar closing near its low, it is a sell signal bar for next week.
• For now, odds slightly favor Crude Oil to trade at least a little lower.
• Traders will see if the bears can create follow-through selling. If they do, the odds of a retest and breakout below the December low will increase.
• Crude Oil is trading near the lower third of the trading range, which is the buy zone of trading range traders.
• While the market can still trade lower, odds favor the trading range to continue.
• Traders will BLSH (Buy Low, Sell High) until there is a breakout with sustained follow-through buying/selling from either direction.

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