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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