Large Crude Oil Trading Range

Market Overview: Crude Oil Futures

The market formed a large Crude Oil trading range following the breakout in March. Bulls see April as a pullback and want a second leg sideways to up. Bears want the March 9 high area to act as resistance. If the market trades higher, they want a failed breakout above the March 9 high, forming a reversal bar or bars with prominent upper tails.

Crude oil futures

The Monthly crude oil chart

• April formed an inside bull bar closing in its upper half, with a long tail below and a prominent upper tail.
• Last month, we said traders were watching whether bulls could generate follow-through buying for a breakout above the March 9 high, or whether the market would fail above it with a long upper tail or a bear bar.
• April had two-sided trading within March’s range.
• Bears see the rally as a buy vacuum test of the 2022 high, followed by a pullback and a retest of the March 9 high in April.
• Bears want the March 9 high area to act as resistance.
• If the market trades higher, they want a failed breakout above the March 9 high, forming a reversal bar or bars with prominent upper tails.
• Bears need strong bear bars to demonstrate control.
• Bulls see April as a pullback and want a second leg sideways to up.
• They want any pullback to remain sideways and weak, with overlapping bars and prominent lower tails.
• The move up consists of a five-bar bull microchannel with micro gaps, indicating bull strength.
• Bulls want a retest and breakout above the March 9 high, followed by a measured move based on the height of the initial rally in March.
• Bulls need consecutive strong bull bars to increase the odds of a successful breakout.
• The market broke out of a tight trading range in March following the Middle East conflict.
• Crude oil is forming a sideways-to-down pullback following the rally, which could last a couple of months.
• Traders will watch whether bulls can generate follow-through buying for a breakout above the March 9 high, or whether the market fails above it with a long upper tail or bear bars.
• Will the market instead trade lower to retest the April low or the 20-month EMA?
• For now, the market could still retest the March 9 high or nearby levels.
• The candlestick following an inside bar sometimes forms another inside bar, creating an ii (inside–inside) breakout mode pattern.
• Any escalation or de-escalation in the Middle East could accelerate or reverse the current move.

The Weekly crude oil chart

• This week’s candlestick was a bull bar closing below the middle of its range, with a long tail above.
• Last week, we said traders would watch whether bulls could generate follow-through buying to retest the March 9 high, or whether the market would continue to stall around the middle of the range.
• The market traded higher to retest the April 7 high, forming a lower high, followed by a pullback toward the middle of the range.
• Bulls want a retest of the March 9 high, followed by a breakout and a measured move based on the height of the initial rally, projecting to above $160.
• They want any pullback to stall above the April 17 low, forming a large double bottom bull flag.
• Bulls need consecutive bull bars closing near their highs to increase the odds of a strong breakout above the trading range high.
• Bears see the current move as a retest of the prior high and want the top of the trading range to act as resistance.
• They want a reversal from a double top (March 9 and April 7) and a lower high major trend reversal (April 30).
• Bears need consecutive bear bars closing near their lows to show control.
• The market retested the trading range high, forming a lower high.
• The middle of the range is an area of balance and often acts as a magnet.
• The market remains in a trading range with overlapping price action. Traders may continue to Buy Low, Sell High (BLSH)—buying near the lower third and selling near the upper third—until there is a strong breakout with follow-through.
• Traders will watch whether bulls can generate follow-through buying to break above the March 9 high, or whether the market trades lower to retest the bottom of the range near the April 17 low.
• External factors, such as developments in the Middle East, could accelerate or reverse the current move.

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