Market Overview: Crude Oil Futures
The market formed a weekly Crude Oil tight bull channel from the June 4 low. The bulls have a 5-bar bull microchannel which means persistent buying. There may be buyers below the first pullback from such a strong bull microchannel. 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 larger triangle pattern.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bull bar closing slightly above the middle of its range.
- Last week, we said that odds slightly favor any pullback to be minor followed by a retest of the current leg extreme high (Jun 28). Traders will see if the bulls can create a breakout above the broadening triangle or will the market stalls followed by a pullback towards the middle of the trading range (20-week EMA area).
- The market traded sideways to up breaking above last week’s high.
- The bulls managed to create a breakout above the expanding triangle and follow-through buying breaking above the bear trend line.
- They have a 5-bar bull microchannel which means persistent buying. There may be buyers below the first pullback from such a strong bull microchannel.
- They got a reversal from a wedge bull flag (Apr 22, May 8, and June 4) and a higher low major trend reversal.
- The next target for the bulls is the April 12 high.
- They hope to get a strong breakout above the broadening triangle.
- If there is a deeper pullback, the bulls want the 20-week EMA to act as support.
- Previously, the bears got 3 pushes lower forming a wedge (Apr 22, May 8, and June 4).
- They see the current move as 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 larger triangle pattern.
- Because of the strong rally, the bears will need a strong reversal bar or at least a micro double top before traders will be willing to sell aggressively.
- Since this week’s candlestick is a bull bar closing around the middle of its range, it is a buy signal bar albeit weak (prominent tail above).
- It is following a strong spike up and a 5-bar bull microchannel. There may be buyers below the first pullback.
- For now, odds slightly favor any pullback to be minor followed by a retest of the current leg extreme high (now Jul 5).
- Traders will see if the bulls can create a breakout above the larger triangle pattern or will the market stall around the current levels followed by a pullback towards the middle of the trading range (20-week EMA area).
- If the bulls can create a strong breakout with follow-through buying trading far above the triangle and the April high, the odds of a retest of the September high will increase.
- The middle of the large trading range is an area of balance and can be a magnet.
- 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 prospect of a broadening war in the Middle East can cause volatility in energy prices.
The Daily crude oil chart
- The market traded sideways to up for the week following the sideways pullback last week.
- Previously, we said that the odds slightly favor the market to still be in the sideways to up phase and favor at least a small second leg sideways-to-up after a small pullback.
- The bulls got a strong breakout trading far above the bear trend line and the expanding triangle.
- They see the move down to June 4 simply as a deep pullback.
- They got a reversal from a wedge bull flag (Apr 22, May 8, and Jun 4) and a higher low major trend reversal.
- The move up since June 4 is in a tight bull channel. That means persistent buying.
- Odds favor at least a small second leg sideways to up after a pullback.
- The bulls need to create a breakout above the triangle and the April high with follow-through buying to increase the odds of a retest of the September high.
- If there is a pullback, the bulls want the 20-day EMA to act as support.
- Previously, the bear got a three-legged pullback (therefore a wedge – Apr 22, May 8, and Jun 4) trading below the 20-day EMA.
- They see the current move as a retest of the prior high (Apr 12).
- They want the market to stall around the current levels (around the large triangle area) followed by 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. They also see a micro double top (Jul 2 and Jul 5).
- The problem with the bear’s case is that the move up since June 4 is very strong (tight bull channel).
- They need to create consecutive bear bars closing near their lows to indicate that they are back in control.
- So far, the rally from June 4 is in a tight bull channel with stronger bull bars compared with bear bars that lacked follow-through selling.
- The odds slightly favor the market to still be in the sideways to up phase and favor at least a small second leg sideways to up after a pullback.
- If a pullback begins, traders will see the strength of the pullback.
- If it is weak and shallow, and holding above the 20-day EMA, the odds of a retest of the current leg extreme (now Jul 5 high) will increase.
- Poor follow-through and reversals are hallmarks of a trading range.
- Sidenote: The prospect of a broadening war in the Middle East can cause volatility in energy prices.
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