Market Overview: Crude Oil Futures
The market formed a Crude Oil tight bull channel with some follow-through following last week’s breakout above the 41-week trading range. The bulls want a strong breakout above the trading range and a measured move based on the height of the 41-week trading range. The bears want a reversal down from a failed breakout above the trading range high and a parabolic wedge (Jul 13, Aug 10, and Sept 6).
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a follow-through bull bar closing near its high.
- Last week, we said that the odds slightly favor the market to trade at least a little higher and traders will see if the bulls can create follow-through buying or will the market trade slightly higher but reverse to close lower.
- The bulls managed to create follow-through buying following last week’s breakout above the trading range high.
- They want a strong breakout above the trading range and a measured move based on the height of the 41-week trading range.
- They need to create sustained follow-through buying to increase the odds of a successful breakout and reversal up.
- If the market trades lower, they want a reversal up from a higher low major trend reversal.
- The bears want a reversal down from a failed breakout above the trading range high and a parabolic wedge (Jul 13, Aug 10, and Sept 6).
- They see the strong move up simply as a buy vacuum test of the trading range high within a trading range.
- The problem with the bear’s case is that the move up since June is in a tight bull channel. That means strong bulls.
- They will need to create strong bear bars with follow-through selling to increase the odds of the bear leg beginning.
- Since this week was a bull bar closing near its high, it is a buy signal bar for next week.
- Odds slightly favor the market to trade at least a little higher.
- Traders will see if the bulls can create more follow-through buying or will the market trade slightly higher, but close with a long tail above or with a bear body.
- If the bulls continue to create consecutive bull bars, the odds will swing in favor of a successful breakout.
- The move up since June has also lasted a long time and is slightly climactic. A minor pullback can begin at any moment.
- The market was previously in a multi-month trading range. When a market is in a trading range, 80% of breakouts up and down will fail.
- The bear trend lines becoming progressively less steep also indicates a loss of momentum for the bears.
- The market may be slowly becoming Always In Long.
The Daily crude oil chart
- The market traded sideways to up for the week. Wednesday through Friday’s candlesticks overlap within Tuesday’s range.
- Previously, we said that odds slightly favor at least a small retest of the prior leg extreme (Aug 10).
- The bulls got a breakout above the 41-week trading range high with some follow-through buying this week.
- The second leg up is strong in the form of a bull spike. That means strong bulls.
- They want a strong breakout followed by a measured move based on the height of the 41-week trading range.
- The bulls will need to continue creating follow-through buying to increase the odds of a successful breakout above the trading range.
- If the market trades lower, they want the 20-day exponential moving average to act as support.
- The bears hope that the tight channel up is simply a buy vacuum testing the trading range high.
- They want a failed breakout above the 41-week trading range and a reversal down from a micro double top (Sept 5 and Sept 8).
- They hope to get a reasonable sell signal bar and a low 2 short entry.
- Since Friday was a bull bar closing near its high, it is a buy signal bar for Monday.
- If the bulls continue to create follow-through buying trading far above the trading range, odds will swing in favor of a successful breakout.
- However, buying aggressively around the trading range high before a confirmed breakout may not be an ideal strategy.
- While the market continues to slightly favor sideways to up, the recent move up is slightly climactic. A minor pullback can begin at any moment.
- If a pullback begins, a reasonable target for the bears would be the 20-day exponential moving average.
- 80% of breakouts up and down from a trading range will fail. Traders will BLSH (Buy Low, Sell High) in trading ranges until there is a strong breakout from either direction with follow-through buying/selling.
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