Market Overview: Crude Oil Futures
The Crude oil futures looks like a Crude Oil failed breakout after trading far below the triangle and 16-week trading range but reversed higher into the trading range. The bears hope that the market will continue to trade sideways to down in April. The 4 consecutive doji(s) with prominent tails below on the monthly chart below indicate that the bears are not as strong as they hoped to be. The bulls need to create credible buying pressure (strong bull bars) breaking far above the December high to increase the odds of higher prices.
Crude oil futures
The Monthly crude oil chart
- The March monthly Crude Oil candlestick was an outside bear doji closing in the upper half of the range with a long tail below.
- Last month, we said that because of the poor follow-through selling, we may begin to see Crude Oil do the opposite and attempt to push higher. The first breakout from a triangle can fail 50% of the time.
- This month first broke above the triangle which failed, and the market then broke out below after that. Crude Oil then reversed back into the triangle.
- The last 4 candlesticks are consecutive bear doji(s). That means that while the market has traded sideways to down, the bears are not yet very strong.
- The bears got a strong reversal down in June 2022 followed by a weaker second leg sideways to down around the 20-month moving average.
- By breaking below the 6-month trading range, the bears completed the wedge pattern (Sept 26, Dec 9, and Mar 20).
- However, they were not able to create sustained follow-through selling.
- The bears hope that this is simply a deep pullback and wants April to continue trading sideways to down.
- 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).
- The bulls will need to create a strong breakout above the recent 4-month trading range high (Dec high) with follow-through buying to increase the odds of higher prices.
- Since March closed above the middle of the range, the bulls were slightly stronger. It is a buy signal bar for April, albeit a weaker one.
- The candlestick after an outside bar often is an inside bar or has a lot of overlapping price action. If it is, it will form an ioi (inside-outside-inside) pattern, which is a breakout mode pattern.
- For now, 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.
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a big bull bar closing near its high.
- Last week, we said the odds slightly favor Crude Oil to still be in the sideways to up pullback phase early in the week. Traders will see if the bulls can create a strong follow-through bull bar, or will the market continue the move lower.
- This week was a strong follow-through bull bar trading back into the triangle and 16-week trading range.
- The bulls want 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).
- They want a breakout above the 16-week trading range and a retest of November and June highs.
- For that, the bulls will need to create consecutive bull bars closing near their highs trading far above the 16-week trading range to increase the odds of a reversal higher.
- If Crude Oil trades lower, they want a reversal up from a higher low major trend reversal (Mar 20).
- The bears got a breakout below the triangle and 16-week trading range from a Low-4 sell setup but did not get follow-through selling.
- They hope that the current deep pullback is simply a breakout test and wants at least a small second leg sideways to down, retesting March 20 low.
- However, because this week was a big bull bar closing near its high, it is a weak sell signal bar for next week. It is a good buy signal bar.
- Crude Oil could be forming a trending trading range.
- Reversals and poor follow-through are hallmarks of trading range activities.
- The overlapping candlesticks are further evidence that Crude Oil is in a trading range.
- Traders will BLSH (Buy Low, Sell High) of trading ranges until there is a strong breakout from either direction with follow-through buying/selling.
- For now, odds slightly favor Crude Oil to trade at least a little higher, likely retesting the 20-week exponential moving average.
- Traders will see if the bulls can create another consecutive bull bar or will the Crude Oil trade slightly higher but stall around the 20-week exponential moving average.
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