Market Overview: Crude Oil Futures
The market formed a weekly Crude Oil bull leg in the form of a 5-bar bull micro channel. The bulls want a retest of the July 5 high and hope to get a strong breakout above the triangle pattern. 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.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bear bar closing around the middle of its range with a long tail below.
- Last week, we said that odds slightly favor any pullback to be minor followed by a retest of the current leg extreme high (Jul 5).
- The market formed a pullback trading below last week’s low but reversed higher from midweek onward to close off its low.
- Previously, the bulls managed to create a breakout and follow-through buying trading above the 20-week EMA and the bear trend line.
- They had a 5-bar bull microchannel which means persistent buying.
- There may be buyers below the first pullback from such a strong bull microchannel.
- The next target for the bulls is the April 12 high.
- They hope to get a strong breakout above the triangle pattern.
- If there is a deeper pullback, the bulls want the 20-week EMA to act as support.
- The bears see the current move as 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 need to create a follow-through bear bar next week to increase the odds of a deeper pullback.
- If the market trades higher, the bears want the market to stall around the July 5 high and form a micro double top.
- Since this week’s candlestick is a bear bar closing around the middle of its range, it is a sell signal bar albeit weak (long tail below).
- There may be buyers below the first pullback from such a strong bull microchannel.
- Traders will see if the bulls can create a retest of the July 5 high and a strong breakout above the triangle with follow-through buying. If they do, the odds of a retest of the September high will increase.
- 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 middle of the large trading range is an area of balance and can be a magnet.
- 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 prospect of a broadening war in the Middle East can cause volatility in energy prices.
The Daily crude oil chart
- The market traded lower early in the week but reversed higher from midweek onwards. Friday traded higher but reversed into a bear bar closing near its low.
- Last week, we said if a pullback begins, traders will see the strength of the pullback. If it is weak and shallow, and holding above the 20-day EMA, the odds of a retest of the current leg extreme (Jul 5 high) will increase.
- The market formed a retest of the July 5 high on Friday but it was a lower high.
- The bulls got a strong breakout trading far above the bear trend line, testing the triangle top.
- The move since June 4 is in a tight bull channel. That means persistent buying.
- The odds favor at least a small second leg sideways to up after a pullback. So far, the second leg sideways to up (this week) is not as strong as the Bulls hope it would be.
- If there is a deeper pullback, the bulls want the 20-day EMA to act as support.
- They want another retest of the July 5 high followed by a breakout with follow-through buying.
- The bulls need to create a breakout above the triangle and the April high with follow-through buying to increase the odds of a retest of the September high.
- The bear sees the current move as a buy vacuum and a bull leg within a trading range, testing the prior high (April 12).
- They want the market to stall around the current levels (around the top of the triangle) followed by 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 also see a micro double top (Jul 2 and Jul 5) and a smaller lower high major trend reversal (Jul 5 and Jul 12).
- They need to create consecutive bear bars closing near their lows and trading below the 20-day EMA to indicate they are back in control.
- So far, the rally from June 4 is in a tight bull channel with stronger bull bars compared with bear bars that lacked sustained follow-through selling.
- Because the sideways-to-down pullback has just begun, the market may still be in the pullback phase early next week.
- Traders will see the strength of the pullback. If it is weak and shallow, and holding above the 20-day EMA, the odds of a retest of the current leg extreme (Jul 5 high) and subsequent breakout attempt will increase.
- For now, the odds slightly favor the current pullback to be minor.
- 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 potential resistance area.
- Poor follow-through and reversals are hallmarks of a trading range.
- Sidenote: The prospect of a broadening war in the Middle East can cause volatility in energy prices.
Market analysis reports archive
You can access all weekend reports on the Market Analysis page.
