Crude Oil Weak Follow-through

Market Overview: Crude Oil Futures

The weekly chart formed a Crude Oil weak follow-through bear bar. The bulls want a retest and breakout above the August 10 high. The bears want the start of the bear leg to retest the 40-week trading range low. The market is in a 40-week trading range. Traders will BLSH (Buy Low, Sell High) in trading ranges until there is a strong breakout from either direction with follow-through buying/selling.

Crude oil futures

The Weekly crude oil chart

• This week’s candlestick on the weekly Crude Oil chart was a consecutive bear bar with a long tail below, closing above the middle of its range.
• We said that last week was not a strong sell setup as there may be buyers below the first pullback from such a strong bull microchannel (7-bar bull microchannel).
• This week traded lower but reversed to close above the middle of its range. 
• The bears manage to get follow-through selling albeit weaker.
• They want a reversal down from around the trading range high and the beginning of the bear leg to test the trading range low.
• They hope that the prior strong move up was simply a buy vacuum test of the trading range high.
• They will need to continue creating consecutive bear bars to increase the odds of the bear leg beginning.
• The bulls got a retest of the trading range high (April high).
• They want a strong breakout above the trading range high and a measured move based on the height of the 40-week trading range.
• The prior move up was in a 7-bar bull microchannel which means persistent buying. That increases the odds that the first pullback will be minor.
• However, buying aggressively around the top of a trading range is not an ideal strategy.
• If the market continues to stall around the trading range high area, it will increase the odds of more profit-taking from the bulls. 
• While the prior move up was strong, it could still only be a bull leg within a trading range.
• The market is in a 40-week trading range. Traders will BLSH (Buy Low, Sell High) in trading ranges until there is a strong breakout from either direction with follow-through buying/selling.
• This week’s bear bar with a long tail below is a weaker sell signal bar. 
• Traders will see if the bears can continue to create consecutive bear bars or will the bulls be able to create a retest of the recent leg high (Aug 10).
• In April, traders were expecting at least a second leg sideways to up following a strong spike up to the trading range high (April 12) but it never came. Will the current leg be the same?

The Daily crude oil chart

• The market traded sideways to down for the week. Thursday formed a micro double bottom with follow-through buying on Friday.
• Last week, we said that the odds favor at least a small retest of the prior leg extreme (Aug 10) and traders will see if the bulls can create the retest of the August 10 high or will the bears get another leg down instead.
• This week formed another weaker leg lower.
• The bears hope that the previous tight channel up was simply a buy vacuum testing the trading range high.
• They want the market to reverse lower from around the 40-week trading range high. 
• They want an endless pullback that turns into a bear leg testing the trading range low, like the one in April.
• They will need to create strong consecutive bear bars closing near their lows to increase the odds of a deeper reversal down.
• Previously, the bulls got a retest of the 40-week trading range high.
• The move-up was in a tight bull channel. That means strong bulls.
• They want a retest and strong breakout above the 40-week trading range and a measured move up based on the height of the trading range.
• The bulls hope that the pullback has fulfilled the minimum requirement of TBTL (Ten Bars, Two Legs).
• They want a reversal up from a double bottom bull flag (Aug 17 and Aug 24), or a wedge bull flag if Crude Oil trades lower next week.
• Because of the strong leg up, the current pullback may only be minor and slightly favor at least a small retest of the prior leg extreme (Aug 10).
• However, buying aggressively around the trading range high is not an ideal strategy.
• The market is in a 40-week trading range. Traders will BLSH (Buy Low, Sell High) in trading ranges until there is a strong breakout from either direction with follow-through buying/selling.
• Since Friday was a bull bar closing in the upper half, it is a buy signal bar for Monday albeit weaker due to the prominent tail above.
• Traders will see if the bulls can create follow-through buying early next week. Or will the bears be able to create another strong leg down?
• The longer the bulls fail to create a continuation up, the higher the odds that the bear leg will begin, and the bulls begin to take profits aggressively.

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