Market Overview: Crude Oil Futures
The weekly chart formed a weak Crude Oil breakout from the small expanding triangle. The bulls want the 20-week EMA or the bull trend line to act as support. They want a failed breakout below the bull trend line. The bears need to create follow-through selling trading far below the 20-week EMA to increase the odds of retesting the trading range low.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bear bar closing in its upper half with a long tail below and closing below the 20-week EMA.
- Last week, we said that traders would see if the bears can create a strong retest and breakout below the May 24 low.
- The bears see the recent tight trading range (prior 4 weeks) simply as a sideways pullback and want another strong leg down (with the first leg being the April 5 to May 8 move).
- They got a strong leg down this week, but the market reversed off the low of its range. The long tail below indicates that the bears are not yet as strong as they hoped to be.
- The bears have managed to create 3 consecutive closes below the 20-week EMA.
- They need to create follow-through selling trading far below the 20-week EMA to increase the odds of retesting the trading range low.
- If the market trades higher, they want the 20-week EMA and the bear trend line to act as resistance.
- The bulls want a retest of the April 12 high after the current pullback.
- They want the 20-week EMA or the bull trend line to act as support. They want a failed breakout below the bull trend line.
- They also want a failed breakout from the broadening triangle.
- They want a reversal from a wedge (Apr 22, May 8, and June 4) and a higher low major trend reversal.
- They will need to create strong bull bars trading far above the 20-week EMA to increase the odds of a retest of the April high.
- Since this week’s candlestick is a bear bar closing in its upper half with a long tail below, it is not a strong sell signal bar for next week.
- Because it closed above the middle of its range, it is a buy signal bar albeit weaker.
- Traders will see if the bears can create a follow-through bear bar next week.
- If the bears can create follow-through selling, the odds of a retest of the trading range low will increase.
- Or will the bulls be able to create a strong entry bar by trading above this week’s high instead?
- If the bears continue to fail to push lower, we could see the market do the opposite and push higher in the weeks ahead. This remains true.
- The market is trading around the middle of the large trading range. It is 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
- The Crude Oil market broke below the expanding triangle on Monday with limited follow-through selling. The market then reversed off the low of the week from midweek onwards.
- Previously, we said that the market formed a small triangle and is in a breakout mode.
- The bulls see the current move simply as a deep pullback.
- They want a reversal from a wedge bull flag (Apr 18, May 8, and Jun 4) and a higher low major trend reversal.
- The bulls will need to create consecutive bull bars closing near their highs and trading far above the 20-day EMA to increase the odds of a retest of the April 12 high.
- The bear got a three-legged pullback (therefore a wedge – Apr 18, May 8, and Jun 4) trading below the 20-day EMA.
- They see the move from Wednesday to Friday simply as a pullback and a test of the breakout point.
- They want a resumption lower to retest the trading range low.
- They need to break far below the bull trend line to increase the odds of retesting the December low.
- If the market trades higher, they want the 20-day EMA or the bear trend line to act as resistance.
- So far, the market is trading lower (since April 12) in a broad bear channel.
- For now, until the bulls can create strong consecutive bull bars trading far above the 20-day EMA, the odds slightly favor the broad bear channel to continue.
- If the market trades higher, traders will see if the bulls can create consecutive bull bars trading far above the 20-day EMA and the bear trend line.
- Or will the market stall (perhaps around the bear trend line area or the 20-day EMA again) and reverse lower?
- The market is trading around the middle of the large trading range which can be an area of balance.
- Poor follow-through and reversals are hallmarks of a trading range.
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