Monthly Crude Oil Testing the Trading Range Low

Market Overview: Crude Oil Futures

The market formed a monthly Crude Oil testing the trading range low. The bears need to create a strong breakout below the December and May lows with follow-through selling to increase the odds of a measured move down. The bulls hope the trading range low area will act as support.

Crude oil futures

The Monthly crude oil chart

• The April monthly Crude Oil candlestick was a big bear bar closing in its lower half with a prominent tail below.
• Last month, we said traders would see if the bears could create a strong breakout below the September or December low with follow-through selling, or if the market would stall around the trading range low and close the monthly candlestick with a long tail instead.
• The bears got a strong bear leg to retest the bottom of the trading range.
• They want a breakout below the trading range followed by a measured move based on the height of the trading range.
• They need to create a strong breakout below the December and May lows with follow-through selling to increase the odds of a measured move down.
• The bulls see the current move as a bear leg and a sell vacuum testing the trading range low.
• They hope the December low area will act as support.
• If the market trades lower, they want the May low to act as support.
• They want the market to retest the middle of the trading range (around the 20-month EMA).
• As strong as the recent selloff is, it could still be a sell vacuum and a bear leg within the trading range.
• The market is currently trading around the lower third of the trading range which can be the buy zone of trading range traders.
• Traders will BLSH (Buy Low, Sell High) in a trading range until a breakout with sustained follow-through buying/selling.
• That means buying in the lower third or selling in the upper third of the trading range.
• For now, traders will see if the bears can create a follow-through bear bar in May.
• Or will the market stall around the current levels and trade higher instead?
• Markets have inertia and tend to continue what they have been doing.
• Until a breakout with strong follow-through selling, the market remains in a trading range.
• Poor follow-through and frequent reversals are hallmarks of trading ranges.

The Weekly crude oil chart

• This week’s candlestick on the weekly Crude Oil chart was a bear bar closing in its lower half with a prominent tail below.
• Last week, we said traders would see if the bulls could create more follow-through bull bars, or if the market would stall and form a retest of the April 9 low instead.
• The market formed another leg down to retest the April 9 low, a higher low so far.
• The bulls see the recent move (April 9) as a large 2-legged sell vacuum and a bear leg within the trading range.
• They see the move this week as a retest of the prior low.
• They want a reversal from a higher low major trend reversal.
• They hope to get a retest of the middle of the trading range.
• If the market trades lower, they want it to form a double bottom (with Apr 9 low).
• The bears got a large 2-legged bear leg testing the bottom of the trading range.
• They hope to get a retest of the April 9 low, even if it only forms a higher low. The move is currently underway.
• They want the third leg down completing the wedge pattern with the first two legs being the March 5 and April 9 lows.
• They need to create more bear bars to increase the odds of a breakout below the trading range.
• While the recent move down was strong (Apr 9), it could still only be a sell vacuum and a bear leg testing the bottom of the trading range.
• Crude oil is currently trading around the lower third of the trading range which can be the buy zone of trading range traders.
• The market remains in a large trading range.
• Traders will BLSH (Buy Low, Sell High) until there is a breakout from either direction with sustained follow-through buying/selling.
• That means selling in the upper third and buying in the lower third of the trading range.
• For now, traders will see if the bears can create a follow-through bear bar. That would increase the odds of a retest and breakout below the April 9 low.
• Or will the market stall around the trading range low and trade higher instead?
• Poor follow-through and frequent reversals are hallmarks of trading ranges.

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