Market Overview: Crude Oil Futures
The market formed a Crude Oil double bottom bull flag on the weekly chart. If there is a pullback (bounce), the bears want at least a small second leg sideways to down to retest the current leg low (now Aug 5). The bulls want a reversal from a double bottom bull flag (Jun 4 and Aug 5) and a higher low.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bull reversal bar closing near its high with a long tail below.
- Last week, we said the market may still trade slightly lower, but the selloff is also climactic. Traders will see if the bears can continue to create follow-through selling or would the market trades slightly lower but stalls, beginning the minor pullback phase.
- The market traded lower early in the week but lacked follow-through selling. The market then traded sideways to up for the rest of the week.
- The bears got 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 large triangle pattern.
- The bears managed to create a tight bear channel which means persistent selling.
- If there is a pullback (bounce), the bears want at least a small second leg sideways to down to retest the current leg low (now Aug 5).
- Previously, the bulls had a strong bull leg but couldn’t create a strong breakout above the triangle pattern.
- They see the current move simply as a pullback and want at least a small retest of the recent high (July 5).
- They want a reversal from a double bottom bull flag (Jun 4 and Aug 5) and a higher low.
- They must create a strong bull entry bar with follow-through buying to increase the odds of retesting the July 5 high.
- Since this week’s candlestick is a bull bar closing near its high, it is a buy signal bar for next week.
- The market may trade at least a little higher.
- Traders will see if the bulls can create a strong entry bar trading above the 20-week EMA.
- Or will the market trade slightly higher but stall around the 20-week EMA area?
- The market is trading around the middle of the large trading range which 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.
- Side note: The ongoing turmoil in the Middle East can cause volatility in energy prices.
The Daily crude oil chart
- The market traded lower on Monday but lacked follow-through selling. Crude Oil then traded sideways to up for the rest of the week.
- Previously, we said that traders will see if the bulls can create a pullback to retest the July 5 or will the bears get another leg down to retest the bottom of the triangle?
- The market formed another leg down to retest the bottom of the triangle but there was no strong breakout.
- The bulls see the current move simply as a deep pullback testing the June 4 low and the bottom of the triangle.
- They want a reversal from a double bottom bull flag (Jun 4 and Aug 5) and a parabolic wedge (Jul 23, Jul 30, and Aug 5).
- They want the market to reverse above the 20-day EMA and break above the bear trend line.
- They hope to get a retest of the July 5 high followed by a breakout above the triangle pattern with follow-through buying.
- The bear got a reversal around the top of the triangle from a double top bear flag (Apr 12 and Jul 5) and a lower high major trend reversal.
- They want a retest of the June 4 low. They got what they wanted.
- They see the move higher this week simply as a pullback (which can last at least 2 legs).
- They want the bear trend line or the 20-day EMA to act as resistance.
- If the market trades higher, they want a reversal from a double top bear flag with the August 1 high.
- At a minimum, they want a small sideways to down leg to retest the August 5 low.
- So far, the market has traded back to the middle of the trading range which is an area of balance and a magnet.
- Traders will see if the bulls can continue to create follow-through buying and a 2-legged sideways to up pullback trading far above the 20-day EMA and the bear trend line.
- Or will the market trade slightly higher but stall around the bear trend line area or the August 1 high area?
- Poor follow-through and reversals are hallmarks of a trading range.
- Side note: The ongoing turmoil in the Middle East can cause volatility in energy prices.
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