Crude Oil Breakout below Trading Range and Bull Trend Line

Market Overview: Crude Oil Futures

Crude oil futures weekly candlestick was a breakout below trading range and the bull trend line closing near its low. The bears want a measured move down using the height of the September to November trading range which will take them to around $56. The bulls want a failed breakout below the September low and the bull trend line. They want a reversal higher from a lower low major trend reversal. 

Crude oil futures

The Weekly crude oil chart

• This week’s candlestick on the weekly Crude Oil chart was a big bear bar breaking below the September low and the major bull trend line.
• Last week, we said that Crude Oil is in a trading range of around 74 and 94. Traders will BLSH (Buy Low, Sell High) until there is a strong breakout from either direction.
• The bears got a reversal lower from a double top bear flag (October 10 and November 7).
• They then got the second leg sideways to down retesting November 28 low and a breakout following last week’s pullback.
• The bears want a measured move down using the height of the September to November trading range which will take them to around $56.
• They need to create a consecutive bear bar next week to confirm the breakout below the trading range and the bull trend line.
• The bulls want a failed breakout below the September low and the bull trend line. They want a reversal higher from a lower low major trend reversal.
• They want next week to close with a bull body even though Crude Oil may trade slightly lower first.
• Since this week was a big bear bar closing near the low, it is a good sell signal bar for next week. It is a weak buy signal bar.
• Odds slightly favor Crude Oil to trade at least a little lower.
• Traders will see if the bears get follow-through selling or if next week trades lower first, but reverse to close with a bull body with a long tail below.
• If the bears get a follow-through bear bar especially if it is strong, the odds of a successful breakout increase.
• The US Government plans to refill the SPR (Strategic Petroleum Reserve) which will likely provide a floor on price at some point and prevent a catastrophic sharp crash. (Source: US to complete 180 million barrel drawdown…)

The Daily crude oil chart

• Crude Oil traded slightly higher on Monday but reversed into a big outside bear bar. It then traded lower for the rest of the week.
• It broke below the September low and the bull trend line with follow-through selling. 
• The bears got a reversal lower from a double top bear flag with October 7 high.
• This week, the bears got the second leg sideways to down breaking far below the major bull trend line and September low. 
• The bears got 6 consecutive bear bars since December 1. That means strong bears.
• That increases the odds of at least a small second leg sideways to down after a pullback.
• Bears want a measured move down based on the height of the trading range which will take them to around $56.
• The bulls want a failed breakout below trading range and the major bull trend line.
• They want a reversal higher from a lower low major trend reversal and a wedge bottom (Nov 18, Nov 25 and Dec 9).
• Because of the tight bear channel down, the bulls will need a strong bull reversal bar or at least a micro double bottom before they would be willing to buy aggressively.
• For now, odds slightly favor Crude Oil to trade at least a little lower. 
• If there is a small pullback (bounce), odds favor at least a small second leg sideways to down after the pullback.
• The US Government plans to refill the SPR (Strategic Petroleum Reserve) which will likely provide a floor on price at some point and prevent a catastrophic sharp crash. (Source: US to complete 180 million barrel drawdown…)

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