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Crude Oil Is Trading in Area of Balance

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Market Overview: Crude Oil Futures

Crude Oil is trading in area of balance around the middle of the trading range. If the market trades higher, the bears expect sellers above the 5-bar bear microchannel, forming a double top bear flag with the August or July highs. The bulls will need consecutive bull bars breaking strongly above the 5-bar bear microchannel to show that they are regaining control.

Crude oil futures

The Monthly crude oil chart

Crude Oil Monthly - Middle of TR, October Formed Higher Low, Crude Oil Is Trading in Area of Balance
  • The October monthly Crude Oil candlestick was a bear doji closing in its upper half, with a long tail below.
  • Last month, traders were watching to see if the bears could create more follow-through selling below the 20-month EMA, or if the market would stall and reverse back above it.
  • The market traded lower in the first half of October but reversed to close near the middle of the trading range. The long tail below the candlestick indicates buyers are defending the lower third of the trading range.
  • The bears want a bear leg to retest the trading range low (April 9).
  • They want the 20-month EMA or the bear trend line to act as resistance.
  • If the market trades higher, they expect sellers above the 5-bar bear microchannel, forming a double top bear flag with the August or July highs.
  • They need sustained follow-through selling breaking below the October low to increase the odds of reaching the trading range low.
  • The bulls see the current move as a pullback within the trading range and want it to form a higher low (October 20).
  • They want the lower third of the trading range to act as support. So far, this is the case.
  • They want a retest of the June 23 high, even if it only forms a lower high.
  • They will need consecutive bull bars breaking strongly above the 5-bar bear microchannel to show that they are regaining control.
  • The market remains in a trading range.
  • Traders will continue to Buy Low, Sell High (BLSH) — buying near the lower third and selling near the upper third — until a clear breakout with sustained follow-through occurs.
  • Currently, the market is trading around the middle of the trading range, which is an area of balance and a magnet.
  • For now, traders will watch whether the bears can create follow-through selling below the 20-month EMA, or if the bulls can break strongly above the 5-bar bear microchannel and close back above the 20-month EMA instead.
  • There may be sellers above the first pullback following the 5-bar bear microchannel.
  • Poor follow-through and frequent reversals are hallmarks of trading ranges.

The Weekly crude oil chart

Crude Oil Weekly - Middle of TR, Area of Balance & Magnet
  • This week’s candlestick on the Crude Oil weekly chart was an inside bear bar closing slightly above the middle of its range, with a long tail below.
  • Last week, we said traders would watch whether the bulls could create more follow-through buying above the 20-week EMA and the bear trend line, or if the market would stall around the 20-week EMA and form a small retest of the October 20 low.
  • The market formed a small pullback around the 20-week EMA this week.
  • The bulls see the recent selloff as a large two-legged pullback within the trading range (first leg: Jun 23–Aug 13).
  • They want the lower third of the trading range to continue acting as support, which has been the case so far.
  • They need to create strong consecutive bull bars closing far above the 20-week EMA and the bear trend line to increase the odds of a test of the trading range high.
  • The bears see the current move as a pullback and want the 20-week EMA and the bear trend line to act as resistance.
  • They view the recent rally as forming a large wedge bear flag (Jul 30, Sep 26, and Oct 24).
  • They want at least a small second leg sideways to down to retest the October 20 low, even if it forms a higher low.
  • If the market trades higher, they want the September 26 high to act as resistance.
  • Crude Oil remains in a large trading range.
  • Traders will likely continue to BLSH (Buy Low, Sell High) within the range — buying in the lower third and selling in the upper third — until there is a clear breakout with sustained follow-through in either direction.
  • Currently, the market is trading near the middle of the range, which is an area of balance and a magnet.
  • Traders will watch whether the bulls can create consecutive bull bars closing above the 20-week EMA and the bear trend line in the weeks ahead.
  • Or if the market will stall and form a small retest of the October 20 low instead?

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