Market Overview: Crude Oil Futures
The market formed a Crude Oil 2-legged bear leg on the monthly chart. The bears want a breakout below the trading range followed by a measured move based on the height of the trading range. The bulls hope the September or December low will act as support.
Crude oil futures
The Monthly crude oil chart
- The March monthly Crude Oil candlestick was a bull bar closing near its high with a long tail below.
- Last month, we said traders would see if the bears could create follow-through selling trading below the 20-month EMA, or if the market would stall around the 20-month EMA followed by a retest of the January 15 high instead.
- The market traded below the 20-month EMA earlier in March but lacked follow-through selling. The market then traded sideways to up for the rest of the month. The market traded slightly higher in early April but reversed down to test the bottom of the trading range.
- The bears got a reversal from a double top bear flag (Apr 12 and Jan 15) to retest the bottom of the trading range.
- They want a breakout below the trading range followed by a measured move based on the height of the trading range.
- They need to create a strong breakout below the December low with follow-through selling to increase the odds of a successful breakout.
- The bulls see the current move as a two-legged bear leg and a sell vacuum testing the trading range low.
- They hope the September or December low will act as support.
- If the market breaks below the trading range low, they want a failed breakout followed by a reversal to retest the middle of the trading range.
- So far, April’s candlestick is currently an outside bear bar trading near its low.
- As strong as the recent move is, it could still be a sell vacuum and a bear leg within the trading range.
- The market is currently trading around the lower third of the trading range which could be the buy zone of trading range traders.
- Traders will BLSH (Buy Low, Sell High) in a trading range until a breakout with sustained follow-through buying/selling.
- That means buying in the lower third or selling in the upper third of the trading range.
- For now, traders will see if the bears can create a strong breakout below the September or December low with follow-through selling.
- Or will the market stall around the September or December low area, closing the monthly candlestick with a long tail instead?
- Markets have inertia and tend to continue what they have been doing.
- Until a breakout with strong follow-through selling, the market remains in a trading range.
- The market could still trade at least a little lower.
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a big outside bear bar closing in its lower half with a prominent tail below.
- Last week, we said traders would see if the bulls could create a follow-through bull bar closing above the 20-week EMA, or if the market would stall around the 20-week EMA followed by a retest of the March 5 low in the weeks ahead instead.
- The market traded higher in the first half of the week followed by a strong reversal from Thursday onward.
- The bears got a large two-legged bear leg testing the bottom of the trading range.
- They want a strong breakout below the September or December low followed by a measured move based on the height of the trading range.
- They must continue creating follow-through selling to increase the odds of a successful breakout.
- The bulls see the current move as a sell vacuum and a bear leg within the trading range.
- They see the selloff this week as climactic.
- They hope to get at least a small sideways to up pullback lasting a few weeks.
- They hope that the September or December low will act as support.
- So far, the market formed a big bear bar testing the bottom of the trading range.
- While the big candlestick means strong bears, it is also slightly climactic.
- Sometimes, the candlestick following an outside bar is an inside bar or has a lot of overlapping range.
- Crude oil is currently trading around the bottom of the trading range which is the buy zone of trading range trader.
- The market remains in a large trading range.
- Traders will BLSH (Buy Low, Sell High) until there is a breakout from either direction with sustained follow-through buying/selling.
- That means selling in the upper third and buying in the lower third of the trading range.
- Poor follow-through and frequent reversals are hallmarks of a trading range price action.
- For now, the market could still trade slightly lower.
- Traders will see if the bears can create a follow-through bear bar breaking below the September or December low area.
- Or will the market stall around the current levels, and form a small pullback in the weeks ahead instead?
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