Market Overview: Crude Oil Futures
The Crude oil futures formed a crude oil bear leg testing the March low. The bulls hope that the move is simply a sell vacuum and wants a reversal higher from a double bottom and a lower low major trend reversal. The bears want a strong breakout below the March low.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a small inside bear bar closing near the low with a long tail above.
- Previously, we said that odds slightly favor at least a small second leg sideways to up after the pullback.
- However, the bulls were not able to create the second leg up and the market formed a big bear leg testing the trading range low (March low) instead.
- The bears want the market to stall around the trading range high and form a lower high (against the November high). They got the reversal down that they wanted.
- The move down is in a 5-bar bear micro channel. That means strong bears.
- The bears want a retest of the May 4 low and a breakout below.
- Previously, the bulls got a reversal up from a lower low major trend reversal and a wedge bottom testing the trading range high but could not get a strong breakout in April.
- They were hoping to get at least a small second leg sideways to up but did not get it.
- They hope that the strong selloff in the last few weeks is simply a sell vacuum test of the trading range low.
- The bulls want a reversal from a double bottom (Mar 20 and May 4) and a lower low major trend reversal.
- Since this week was an inside bear bar closing near the low, the market is in breakout mode.
- It is a sell signal bar for next week, so odds slightly favor Crude Oil to trade at least a little lower.
- The first breakout from an inside bar can fail 50% of the time.
- Sometimes, the candlestick after an inside bar is an outside bar or has a lot of overlapping price action.
- Buy vacuum and sell vacuum within a trading range can make the range extremes tests appear very strong, but the breakout is more likely to fail.
- The market is in a 25-week trading range. 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.
- Odds slightly favor the trading range to continue.
- Traders will see if the bears can continue to get consecutive bear bars testing the May low. If they do, the odds of a breakout attempt below increase.
- Or will the market trade slightly lower but close with a long tail below or a bull body?
The Daily crude oil chart
- Crude Oil traded higher earlier in the week but reversed lower from midweek onwards.
- Previously, we said that the odds slightly favor a small second leg sideways to up a pullback. However, if the bears continue to get consecutive bear bars closing near their lows instead, the odds will swing in favor of the bear leg beginning to retest the March low.
- In the last 2 weeks, the bulls were not able to create the second leg sideways to up while the bears manage to get a strong bear leg testing the March low.
- Previously, the bulls got a reversal up from a lower low major trend reversal and a wedge bottom testing the 25-week trading range high.
- However, they were not able to create a breakout with follow-through buying.
- They hope that the current selloff is simply a sell vacuum test of the trading range low.
- They want a reversal from a double bottom with the March low.
- The bulls see the pullback this week (Wed to Fri) simply as a retest of the May 4 low and want a second leg sideways to up breaking far above the 20-day exponential moving average.
- The bears got a strong bear leg testing the March low. The move down was in a parabolic wedge (Apr 21, Apr 28, and May 4).
- It is strong enough for traders to expect at least a small second leg sideways to down, which is currently underway.
- The bears want a retest of the May 4 low followed by a strong breakout below. If the bears continue to create consecutive bear bars closing near their lows, the odds of a breakout attempt below increase.
- Crude Oil is in a 25-week trading range. 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 in trading ranges. Most breakouts from trading ranges fail.
- For now, Crude Oil may trade slightly lower early next week.
- Traders will see if the bears can continue to get consecutive bear bars or will the market trade slightly lower first but stall and reverse higher beginning the bull leg within the trading range.
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