Market Overview: Crude Oil Futures
The Crude oil futures formed a tight trading range in the last 5 weeks. The bears want a retest of the May 4 low. They will need to create a follow-through bear bar next week. The bulls want a reversal from a higher low major trend reversal. Poor follow-through and reversals are more common within a trading range.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bear bar with a small tail below.
- Last week, we said that the bulls need to create follow-through buying to increase the odds of the bull leg within the trading range beginning.
- Monday gapped higher, but the bulls were not able to create sustained follow-through buying.
- The prior move down to March 5 low was in a 6-bar bear microchannel. That means strong bears.
- Last week, the bears got another leg down testing the May 4 low but did not get sustained follow-through selling.
- They hope to get a retest of the May 4 low from a double-top bear flag (May 4 and Jun 5)
- The bulls want a reversal from a double bottom (Mar 20 and May 4) and a higher low major trend reversal (May 31).
- They hope that the strong selloff from April 12 is simply a sell vacuum test of the trading range low and that the last two weeks were simply a weak two-legged retest of the May low.
- They will need to create consecutive bull bars trading far above the 20-week exponential moving average and the bear trend line to increase the odds of higher prices.
- Since this week was a bull bar closing near its low, it is a sell signal bar for next week.
- The bears will need to create follow-through selling next week to increase the odds of a retest of the May low.
- However, the market is in a 29-week trading range. The last 5 weeks formed a tight trading range.
- Poor follow-through and reversals are more common within a 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.
The Daily crude oil chart
- The Crude Oil gapped higher on Monday but reversed to close as a big bear bar. The market was trading sideways to down for the rest of the week. Friday was an inside bear bar closing near its low.
- Previously, we said that if the bulls fail to break far above the 20-day exponential moving average within a couple of weeks, the odds of a retest of the trading range low increase.
- Crude oil formed a retest of the trading range low at the end of May but fell short and then reversed back higher.
- The bulls hope that this week was the (weaker) second leg sideways to down following the reversal from May 24 high.
- They want a strong reversal breaking far above the 5-week tight trading range and trading far above the 20-day exponential moving average.
- For that, they will need to create consecutive bull bars closing near their highs to increase the odds of the bull leg beginning.
- If the market trades lower, the bulls hope that the current tight trading range (the last 5 weeks) is the final flag of the move down and want a reversal up from around the trading range low.
- The bears got a second leg sideways to down (May 31) but fell short of the trading range low.
- They then got another leg down following this week’s big gap-up on Monday, but the leg is weak with overlapping bars and doji(s) with long tails.
- They hope to get a retest of the trading range low from a wedge bear flag (May 10, May 24, and June 5).
- Since Friday was an inside bear bar, the market is in breakout mode. Because it is a bear bar closing near its low, odds slightly favor the market to trade at least a little below it.
- The first breakout from an inside bar can fail 50% of the time.
- Crude Oil has been trading within a tight trading range in the last 5 weeks.
- Poor follow-through and reversals are common in trading ranges.
- Crude Oil is also in a larger 29-week trading range. Most breakouts from trading ranges fail.
- Traders will BLSH (Buy Low, Sell High) in trading ranges until there is a strong breakout from either direction with follow-through buying/selling.
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Dear Andrew,
A good day to you..
Yeah.. so far the bulls haven’t been able to do it.. perhaps it is as what you have said.. another probe lower and form another wedge..
Let’s see how it play out..
Have a blessed week ahead there..
Best Regards,
Andrew
The bulls broke the bear trend with the 4/12 rally and setup a possible LL MTR with the 5/4 low but they have not been able to take the market higher. Perhaps another probe lower to create a wedge with the 3/20 and 5/4 lows?