Market Overview: Crude Oil Futures
The weekly chart is in a Crude Oil weak bull channel. The bulls need to create a strong breakout trading far above the January high to increase the odds of a retest of the trading range high. The bears see the recent sideways to up pullback as forming a wedge bear flag (Dec 26, Jan 29, Mar 19). They also see an embedded wedge forming in the third leg up (Feb 14, Mar 3, and Mar 19).
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a doji bar with a long tail above and closing in the lower half of its range.
- Last week, we said that if the bulls can create a follow-through bull bar, it will increase the odds of the bull leg beginning.
- This week traded higher but reversed to close below last week’s high. The long tail above indicates that the bulls are not yet as strong as they would like to be.
- The bears see the recent sideways to up pullback as forming a wedge bear flag (Dec 26, Jan 29, Mar 19). They also see an embedded wedge forming in the third leg up (Feb 14, Mar 3, and Mar 19).
- They want another leg down to retest the prior leg low (Dec 13).
- They will need to create sustained follow-through selling closing below the 20-week EMA. So far, they have not yet been able to create sustained follow-through selling.
- The bulls see the selloff to the December 13 low simply as a bear leg within a trading range.
- They got a weak bull channel with overlapping candlesticks which has traded slightly above the 20-week EMA for several weeks.
- While this week traded higher, the long tail above indicates that they are not yet as strong as they like to be.
- They will need to create sustained follow-through buying above the January high to increase the odds of the bull leg beginning.
- If the market trades lower, want the 20-week EMA to act as support.
- So far, the market has been trading above the 20-week EMA, albeit not very strong (overlapping candlesticks with alternating bull and bear bars and doji).
- It is in a tight trading range with a slight tilt up (therefore a weak bull channel and a bear flag).
- Since this week’s candlestick is a doji with a long tail above and closing in its lower half, it is a sell signal bar for next week albeit weaker.
- The current pullback has the shape of a wedge bear flag.
- However, the bears have not yet been able to create sustained follow-through selling since the pullback started in December.
- For now, we may see an attempt to create a pullback lower. Traders will see if the bears can create a decent entry bar, preferably closing near its low.
- Until the bears can create consecutive bear bars closing near their lows, odds favor any pullback to be minor and the bull channel to continue.
- Poor follow-through and reversals are the hallmarks of a trading range.
- The inability of the bears to create meaningful follow-through selling is slowly swinging the odds in favor of more sideways to up movements.
The Daily crude oil chart
- Crude Oil traded higher earlier in the week but lacked follow-through buying.
- Last week, we said that traders will see if the bulls can get a sustained breakout above the January high or will the market continue to be in a tight trading range with a slight tilt up.
- So far, the market remains in the sideways to up bull channel.
- The bulls got a bull channel with a lot of overlapping candlesticks and 3 prominent push-ups, therefore a wedge (Dec 26, Jan 26, and Mar 19).
- They hope to get a sustained breakout above the January high to start the bull leg to retest the September high.
- They will need to create consecutive bull bars closing near their highs, trading far above the January high to increase the odds of the bull leg beginning.
- If the market trades lower, they want the 20-day EMA to act as support or a reversal from a higher low major trend reversal.
- The bear sees the current pullback as forming a wedge bear flag (Dec 26, Jan 26, and Mar 19). They also see an embedded wedge forming in the third leg up (Feb 14, Mar 3, and Mar 19).
- The problem with the bear’s case is that follow-through selling has been weak.
- They need to create sustained follow-through selling (strong consecutive bear bars) trading far below the 20-day EMA to increase the odds of the retest of the December low.
- For now, odds slightly favor any pullback to be minor and the bull channel to continue.
- The inability of the bears to create meaningful follow-through selling is slowly swinging the odds in favor of more sideways to up movements.
- If the bulls can get a few strong consecutive bull bars breaking above the bull channel, it can swing the odds of the bull leg beginning.
- On the other hand, if the bears can get a few consecutive bear bars closing near their lows trading below the 20-week EMA, it can swing the odds in favor of a breakout from the wedge bear flag.
- The market is trading around the middle of the large trading range.
- Poor follow-through and reversals are the hallmarks of a trading range.
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