Market Overview: Crude Oil Futures
The market formed a monthly Crude oil ii pattern (inside-inside). The market is in breakout mode. Bears want a breakout below the inside bear bar, while bulls want the breakout to fail and reverse up.
Crude oil futures
The Monthly crude oil chart
- May formed an inside bear bar, closing near its low with small tails.
- Last month, we said traders would watch whether bulls could generate follow-through buying for a breakout above the March 9 high, or whether the market would instead trade lower to retest the April low or the 20-month EMA.
- Bears see the rally as a buy vacuum test of the 2022 high.
- Bears want the 2022 high area to act as resistance.
- Bears want a strong breakout below the ii (inside-inside) pattern to retest the April 17 low or the 20-month EMA.
- They need to create a strong bear entry bar breaking strongly below the triangle to increase the odds of a reversal.
- Bulls want a retest of the March 9 high, but the move formed lower highs in April and May.
- Bulls want any pullback to remain sideways and weak, with overlapping bars and prominent lower tails.
- They hope there are buyers below the first pullback from the 6-bar bull microchannel.
- If the market trades lower, bulls want the move to form a higher low relative to the April 17 low, closing with a long lower tail.
- Bulls want a retest and breakout above the March 9 high, followed by trend resumption.
- Bulls need consecutive strong bull bars to show control.
- The market broke out of a tight trading range in March, followed by sideways trading, forming a triangle.
- The market formed an ii (inside-inside) breakout mode pattern.
- Bears want a breakout below the inside bear bar, while bulls want the breakout to fail and reverse up.
- Traders will watch whether bears can generate a strong bear entry bar in June.
- Or whether the market trades lower but stalls around the April 17 low area and reverses up, closing with a long lower tail instead.
- Any escalation or de-escalation in the Middle East could accelerate or reverse the current move.
The Weekly crude oil chart
- This week formed a bear entry bar, closing near its low after gapping down at the open.
- Last week, we said traders would watch whether bears could generate a strong bear entry bar to test the bull trend line or whether the market would trade slightly lower but stall around the middle of the range instead.
- Bulls want any pullback to form a higher low relative to the May 6 or April 17 lows.
- They see the current move as a pullback forming a large double bottom bull flag with the April 17 low.
- If the market trades lower, bulls want the 20-week EMA or the April 17 low to act as support.
- Bulls need consecutive bull bars closing near their highs and breaking strongly above the triangle to increase the odds of trend resumption.
- Bears see the recent move (May 18) as a retest of the prior high and want the bear trend line to act as resistance. So far, this appears to be the case.
- They want a reversal from a wedge top (March 9, April 7, and April 30) and a lower high major trend reversal.
- Bears generated a strong bear entry bar this week.
- Next, they need to create sustained follow-through selling, breaking strongly below the triangle and the 20-week EMA to increase the odds of a reversal.
- Crude oil is forming a broad contracting triangle, with the market contained within two converging trend lines.
- The market remains in a trading range with overlapping price action. Traders may continue to Buy Low, Sell High (BLSH) — buying near the lower third and selling near the upper third of the range — until there is a strong breakout with follow-through.
- The middle of the range can act as an area of balance and a magnet.
- Traders will watch whether bears can generate strong follow-through selling, breaking below the bottom of the triangle and the 20-week EMA.
- Or whether the market trades lower but stalls around the 20-week EMA or the April 17 low area instead.
- External factors, such as developments in the Middle East, could accelerate or reverse the current move.
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