Market Overview: Crude Oil Futures
The Crude oil futures weekly candlestick formed a crude oil double top bear flag with October 10 high, closing as an outside bear bar. However, the long tail below makes it a weaker bear bar. Bears need a follow-through bear bar to increase the odds of a retest of the September low. The bulls want another breakout attempt above October high.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was an outside bear bar closing slightly below the middle of the bar with long tails above and below.
- Last week, we said that the odds slightly favor Crude Oil to trade at least a little higher and traders will see if the bulls get a follow-through bull bar or fail to do so.
- While this week traded above last week’s high, it reversed into an outside bear bar. The long tail below indicates that the bears are not as strong as they would like to be.
- Bulls got a reversal higher from a wedge bull flag (June 22, July 14 and Sept 26) and a lower low major trend reversal.
- They then got the second leg sideways to up from a higher low major trend reversal (October 18) re-testing October 10 high.
- The bulls need to create consecutive bull bars closing near their highs breaking far above the bear trend line, and the 20-week exponential moving average, to convince traders that the correction may be over.
- They hope this week was simply a pullback and want another breakout attempt above October high.
- If next week trades lower, the bulls want a reversal higher from a double bottom bull flag with October 18 low.
- While the move down since June was in a tight bear channel, the candlesticks had a lot of overlapping price action. The bears are not yet as strong as they could have been.
- The bears hope that the current move is simply a 2-legged sideways to up pullback and want a retest of the September low.
- They want a reversal lower from a double top bear flag with the October 10 or August 30 high or around the 20-week exponential moving average.
- The bears want next week to be a consecutive bear bar closing near its low and below this week’s low.
- Since this week’s candlestick is an outside bear bar with a long tail below, it is a weaker sell signal bar for next week. It also follows 3 prior bull bars with long tails below.
- An outside bar means Crude Oil is in breakout mode. The candlestick after an outside bar often is an inside bar or has a lot of overlapping price action with the prior bar.
- The first breakout from an outside bar also has a 50% chance of failure.
- The last 6 candlesticks had a lot of overlapping price action which means Crude Oil is in a small trading range.
- If the bulls do not create strong bull bars breaking above October 10 high soon, odds are sellers will return and attempt a retest of the September low within 1-3 weeks.
- The US Government plans to refill the SPR (Strategic Petroleum Reserve) at some point around $67-72 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 above last week and Oct 10 high but reversed to close below it with follow-through selling in midweek. Friday reversed higher but closed with a prominent tail above.
- The bulls got a reversal higher from a wedge pattern (June 22, July 14 and Sept 26) and a lower low major trend reversal.
- They then got the second leg sideways to up from a higher low major trend reversal (Oct 18).
- The spike up in early October was the strongest since the selloff in June. The second leg up has 3 pushes (Oct 20, Oct 27, and Nov 7) and a lot of overlapping price action.
- The bulls see this week simply as a pullback and want another breakout attempt above October high.
- If next week trades lower, the bulls want a reversal higher from a double bottom bull flag with October 18.
- The bulls will need to create consecutive bull bars closing near their highs breaking far above November 7 high to convince traders that the correction may be over.
- The bears see the current move simply as a 2-legged pullback and want a reversal lower from a double top bear flag with October 7 or August 30 high.
- They see Friday’s rally simply as a pullback and want at least a small second leg sideways to down next week.
- The bears will need to create consecutive bear bars closing near their lows to increase the odds of a re-test of the September low.
- The last 28 candlesticks had a lot of overlapping price action. That means Crude Oil is in a small trading range between 81 and 93.
- Traders will continue to BLSH (Buy Low, Sell High) until there is a strong breakout from either direction.
- Since Friday was a bull bar with a prominent tail above, it is not a strong sell signal bar for Monday.
- For now, the sideways to down pullback may continue next week to test near the October 18 low.
- Traders will then see if bulls emerge to buy the double bottom bull flag (October 18) or not.
- The US Government plans to refill the SPR (Strategic Petroleum Reserve) at some point around $67-72 which will likely provide support at some point and prevent a catastrophic sharp crash. (Source: US to complete 180 million barrel drawdown…)
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