Market Overview: Crude Oil Futures
The market formed a weekly Crude Oil pullback to the middle of the trading range on the weekly chart. The bulls want a retest of the April 12 high after the current pullback and the bull trend line to act as support. The bears want the 20-week EMA and the bear trend line to act as resistance. They hope to get a retest of the June 4 low, even if it forms a higher low.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bull bar closing in its upper half.
- Last week, we said that traders will see if the bears can create a follow-through bear bar or will the bulls be able to create a strong entry bar instead.
- The bulls manage to create a strong entry bar closing slightly above the 20-week EMA.
- They want a retest of the April 12 high after the current pullback and the bull trend line to act as support.
- They also want a failed breakout from the broadening triangle. So far this is the case.
- They want a reversal from a wedge (Apr 22, May 8, and June 4) and a higher low major trend reversal.
- Since this week closed slightly above the 20-week EMA, the bulls will need to create a follow-through bull bar to increase the odds of higher prices.
- They need to break far above the bear trend line and the 20-week EMA to increase the odds of the bull leg resuming.
- The bears got 3 pushes lower forming a wedge (Apr 22, May 8, and June 4).
- The long tail below last week’s candlestick and the lack of follow-through selling indicate that the bears are not yet as strong as they hoped to be.
- They hope that this week was simply a pullback and want the market to reverse back below the 20-week EMA.
- They see the move since April 12 as a broad bear channel.
- They want the 20-week EMA and the bear trend line to act as resistance.
- They hope to get a retest of the June 4 low, even if it forms a higher low.
- They need to trade far below the 20-week EMA and the bull trend line to increase the odds of retesting the trading range low.
- Since this week’s candlestick is a bull bar closing in its upper half, it is a buy signal bar for next week albeit weaker (prominent tail above). It is not a strong sell signal bar.
- Traders will see if the bulls can create a follow-through bull bar next week, even if it is only a bull doji.
- If the bulls can create follow-through buying, especially one trading far above the bear trend line, the odds of a retest of the May and April highs will increase.
- Or will the market trade slightly higher but stall around the bear trend line area?
- 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 market spiked higher on Monday followed by sideways to up trading for the rest of the week.
- Last week, we said that the odds slightly favor the broad bear channel to continue until the bulls can create strong consecutive bull bars trading far above the 20-day EMA.
- While the market has traded above the 20-day EMA this week, the bulls have not yet created a strong breakout above the bear trendline.
- The Bulls see the move down to June 4 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 and the bear trend line to increase the odds of a retest of the April high.
- If there is a pullback, the bulls want a reversal from a higher low major trend reversal.
- 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 June 4 simply as a pullback.
- They want the market to stall around the current levels (around the 20-day EMA and the bear trend line) followed by a retest of the June 4 low after the current pullback.
- They want the 20-day EMA or the bear trend line to continue acting as resistance.
- They need to break far below the bull trend line to increase the odds of retesting the December low.
- So far, the market has traded back to the middle of the trading range which is an area of balance and a magnet.
- For now, until the bulls can create a breakout trading far above the 20-day EMA and the bear trend line, the odds slightly favor the broad bear channel to continue.
- 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 (around the bear trend line area or the 20-day EMA again) and reverse lower?
- Poor follow-through and reversals are hallmarks of a trading range.
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