Market Overview: Crude Oil Futures
The market formed a Crude Oil wedge on the weekly chart. The bears want a retest of the trading range low and a second leg sideways to down after a larger pullback. The bulls will need to create a couple of strong consecutive bull bars, trading above the 20-week EMA to increase the odds of higher prices.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bear bar with a long tail below.
- Last week, we said that the odds slightly favor the market to still be in the sideways to down phase.
- The bears got a strong move down trading far below the 20-week EMA.
- The move down is in a tight bear channel. That means persistent selling.
- They got another leg down forming a wedge pattern (Oct 6, Nov 16, and Dec 7).
- If the market trades higher, the bears want another leg down after the pullback, retesting the May trading range low.
- Previously, the bulls had a tight bull channel from June to September.
- They see the current move as forming a higher low major trend reversal and a wedge bull flag (Oct 6, Nov 16, and Dec 7).
- They want a retest of the September high followed by a breakout above.
- The bulls will need to create a couple of strong consecutive bull bars, trading above the 20-week EMA to increase the odds of higher prices.
- Since this week’s candlestick is a bear bar closing in the low half, it is a sell signal bar for next week albeit weaker (long tail below).
- For now, until the bulls can create a few strong consecutive bull bars, odds slightly favor the market to still be in the sideways to down phase.
- Crude Oil is trading near the lower third of the trading range, which is the buy zone of trading range traders.
- Traders will BLSH (Buy Low, Sell High) until there is a breakout with sustained follow-through buying/selling from either direction.
- Traders will see if the bears can continue to get consecutive bear bars or will the market stall around the current levels and start the pullback phase.
The Daily crude oil chart
- Crude Oil traded lower for the week with Friday forming a pullback.
- Previously, we said that while the selloff from September is quite strong, it has also lasted a long time and is slightly climactic. A minor pullback can begin within a few weeks.
- The bear got 3 pushes down, forming a wedge pattern (Oct 6, Nov 16, and Dec 7).
- They want a retest of the June or May lows, followed by a breakout below.
- The move down is in a tight bear channel which increases the odds of at least a small sideways to down leg after a slightly larger pullback.
- If the market trades higher, they want the 20-day EMA or the bear trend line to act as resistance.
- The bulls hope that the current move down is simply a deep pullback.
- They want a reversal from a wedge bull flag (Oct 6, Nov 16, and Dec 7) and a higher low major trend reversal.
- They hope to get a retest of the September high.
- They will need to create consecutive bull bars closing near their highs, trading far above the 20-day EMA and the bear trend line to increase the odds of higher prices.
- Crude Oil remains in a 70-week trading range. Traders will BLSH (Buy Low, Sell High) in trading ranges until there is a breakout with sustained follow-through buying/selling.
- This week tested near the lower third of the trading range which is the buy zone for the trading range traders.
- Most breakouts from a trading range fail 80% of the time. Odds slightly favor the trading range to continue.
- For now, the selloff from the end of November is strong enough to slightly favor at least a small sideways to down leg after a pullback.
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