Market Overview: Crude Oil Futures
The Crude oil futures continue to trade sideways forming a 6-month trading range. The bulls want a retest and breakout above April 12 high. If the market trades lower, the bulls want a reversal up from a higher low major trend reversal. The bears want a follow-through bear bar in May. If they get that, the odds of a retest of March low increase.
Crude oil futures
The Monthly crude oil chart
- The April monthly Crude Oil candlestick was a bear bar closing in the lower half with prominent tails above and below.
- Last month, we said that because of the poor follow-through selling over the last 5 months, we may begin to see Crude Oil attempt to do the opposite and push higher to retest the December high within 1-3 months.
- April tested the December high but reversed to close as a bear bar around the middle of the 5-month trading range.
- The bulls want a reversal up from a wedge bottom (Sept 26, Dec 9, and Mar 20).
- They hope that the Dec – Feb tight trading range is the final flag of the move down.
- However, they have not yet been able to create credible buying pressure (strong bull bars) still.
- If the market trades lower, the bulls want a reversal up from a higher low major trend reversal.
- The bulls will need to create strong bull bars with follow-through buying, trading far above the trading range high (Dec) to convince traders that a reversal up is underway.
- The bears hope that April formed another lower high.
- They want a reversal down from a double top bear flag (Dec and April).
- They will need to create a follow-through bear bar in May to increase the odds of a retest of the March low.
- The last 6 candlesticks are overlapping sideways therefore the market is in a tight trading range. Reversals and poor follow-through are common within a trading range.
- Since April is a bear bar closing in the lower half with a prominent tail below, it is a weaker sell signal bar for May.
- Traders will BLSH (Buy Low, Sell High) in trading ranges until there is a strong breakout from either direction with follow-through buying/selling.
- If May is a strong follow-through bear bar, the odds of a retest of the March low and breakout attempt below will increase.
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bear doji with a long tail below.
- Last week, we said that odds slightly favor at least a small second leg sideways to up after the current pullback.
- This week traded lower closing the gap but reversed to close in the upper half of the week’s range.
- The bulls got a failed breakout below the 16-week trading range. They hope that the tight trading range is the final flag of the move down.
- They got a reversal up from a lower low major trend reversal and a wedge bottom (Sept 26, Dec 9, and Mar 20).
- The prior move up from the March low is in a strong spike (consecutive bull bars closing near their highs) and the bulls hope that the market has switched into Always In Long.
- They want a second leg sideways to up to retest April 12 high after the current pullback followed by a breakout above the trading range high (Dec).
- The bears got a breakout below the triangle and 16-week trading range but did not get follow-through selling.
- They hope that the move up from the March low is simply a buy vacuum test of the trading range high.
- They want the market to stall around the trading range high and form a lower high (against the November high).
- If the market trades higher, the bears want the market to stall around April 12 high and reverse lower from a double top.
- Since this week’s candlestick closed in the upper half with a long tail below, it is a weak sell signal bar for next week. It is a buy signal bar albeit weaker due to the bear body.
- For now, odds slightly favor at least a small second leg sideways to up after the current pullback. This remains true.
- Traders will see if the bulls can create a retest of the April 12 high followed by a breakout above or will the market stall around the trading range high and reverse lower again.
- If next week is a big bear bar closing near its low instead, the odds of a retest of the March low increase.
- Traders will BLSH (Buy Low, Sell High) in trading ranges until there is a strong breakout from either direction with follow-through buying/selling.
- Poor follow-through and reversals are common within a trading range.
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