Market Overview: Crude Oil Futures
The bears need a Crude Oil breakout below the bull trend line to increase the odds of the bear leg beginning. The bulls want a retest of the April 12 high after the current pullback, even if it forms a lower high. They want the 20-week EMA or the bull trend line to act as support.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bull doji bar, closing below the 20-week EMA.
- Last week, we said that traders would see if the bears can get a strong breakout below the bear trend line and a follow-through bear bar closing below the 20-week EMA.
- The market traded below last week’s low, but the bears were not able to get a strong follow-through bear bar.
- The bears got a reversal from a wedge pattern (Dec 26, Jan 29, Apr 12) and an embedded wedge in the third leg up (Jan 3, Mar 19, and Apr 12).
- They see this week simply as a pullback and want at least another sideways to down leg, completing the third push down (a wedge) with the first two legs being April 22 and May 8.
- The bears have a 5-bar bear microchannel. That means persistent selling.
- They will need to create consecutive bear bars closing near their lows and far trading below the 20-week EMA and the bull trend line to convince traders that the bear leg is underway.
- The bulls want a retest of the April 12 high after the current pullback, even if it forms a lower high.
- 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.
- Since this week’s candlestick is a bull doji, it is not a strong buy signal bar for next week.
- The market may still be in the sideways to down pullback phase.
- Traders will see if the bears can get a strong breakout below the bull trend line or will the market continue to stall around the current levels.
- The bear leg could be underway if the bears can create a strong breakout and sustained follow-through selling.
- Crude Oil is currently trading around the middle of the large trading range, which can be 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 traded lower on Wednesday but reversed into an outside bull reversal bar. Friday traded higher but reversed into an outside bear bar closing near its low.
- Previously, we said that the market is trading near the upper third of the trading range, which can be the sell zone of trading range traders. Traders will see if sellers appear aggressively here or around the September 28 high area.
- The bulls see the current move simply as a two-legged pullback.
- They want the bull trend line to act as support.
- The problem with the bull’s case is that the recent selling pressure (bigger bear bars with follow-through selling) is stronger than the buying pressure (bull bars with limited follow-through buying).
- The bulls will need to create consecutive bull bars closing near their highs and trading above the 20-day EMA to increase the odds of a retest of the April 12 high.
- The bear got a reversal from a wedge pattern (Dec 26, Jan 26, and Apr 12), an embedded wedge forming in the third leg up (Mar 1, Mar 19, and Apr 5) and a small double top (Apr 5 and Apr 12).
- They then got a second leg sideways to down trading far below the 20-day EMA (May 8).
- They want another leg down completing the wedge pattern with the first two legs being the April 18 and May 8 lows.
- They need to break far below the bull trend line to increase the odds of lower prices.
- For now, the market may still be in the sideways to down leg.
- The market is trading around the middle of the large trading range which can be an area of balance.
- Traders will see if the bears can create sustained follow-through selling breaking below the bull trend line or will the market continue to stall around the May 8 area.
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