Market Overview: Crude Oil Futures
The Crude Oil bears want a breakout below the February 18 low followed by another strong leg down to test the November low area from a wedge bear flag (Feb 3, Feb 11, and Feb 20). The bulls hope to get a retest of the January 15 high from a wedge bull flag (Feb 6, Feb 13, and Feb 18).
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bear doji closing near its low with a long tail above.
- Last week, we said traders would see if the bears could create more follow-through selling following this week’s close below the 20-week EMA. Or if the market would continue to stall around the 20-week EMA followed by a pullback higher within the next few weeks instead.
- This week’s candlestick traded slightly lower but had a lot of overlapping range with last week’s candlestick.
- The bears got some follow-through selling trading below the 20-week EMA albeit not strong.
- The move down is in a bear channel with many overlapping ranges, especially in the last four weeks which indicates weaker momentum.
- The bears want another strong leg down to test the November low area from a wedge bear flag (Feb 3, Feb 11, and Feb 20).
- The bulls see the current move as a deep pullback and a retest of the breakout point (top of the tight trading range).
- They hope to get a retest of the January 15 high from a wedge bull flag (Feb 6, Feb 13, and Feb 18).
- The market attempted to trade higher in the last three weeks (Feb 3, Feb 11, and Feb 20) but the follow-through buying was limited, forming lower highs.
- They need to create strong bull bars closing near their highs to show that they are back in control.
- They want the 20-week EMA and the middle of the trading range area to continue acting as support.
- The market is currently trading around the middle of the large trading range which is an area of balance and a magnet.
- The overlapping ranges in the last 4 weeks indicate slightly weaker selling momentum.
- Attempts to trade higher in the last three weeks (Feb 3, Feb 11, and Feb 20) had limited follow-through buying which indicates the bulls are not yet as strong as they hope to be.
- For now, traders will see if the bears can create a strong breakout below the February 18 low, forming a larger second leg down (with the first leg being Jan 15 to Feb 6).
- Or will the market continue to stall around the 20-week EMA followed by a pullback higher within the next few weeks instead?
- Because of the repeated failure to trade higher in the last 3 weeks (forming lower highs), the market could attempt to break lower next week.
- 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.
The Daily crude oil chart
- The market traded higher most of the week, closing above the 20-day EMA on Thursday. Friday formed a big bear bar closing far below the 20-day EMA.
- Last week, we said that traders would see if the bears could continue to create more follow-through selling to retest the November low area or if the market would continue to stall around the middle of the trading range followed by a pullback instead.
- The market has stalled around the middle of the trading range in the last three weeks. However, the follow-through buying of the pullbacks (Feb 3, Feb 11, and Feb 20) has been limited, forming lower highs.
- The bears got another sideways to down leg testing the middle of the trading range.
- They want a retest of the bottom of the trading range from a wedge bear flag (Feb 3, Feb 11, and Feb 20).
- They want a larger second leg sideways to down (with the first leg being the Jan 15 high to the Jan 27 low).
- They must create a breakout below the February 18 low with follow-through selling to increase the odds of testing the November low.
- If the market trades higher, they want the 20-day EMA or the bear trend line to act as resistance. So far, this is the case.
- The bulls see the current move as a deep pullback testing the breakout point (the top of the tight trading range) and the middle of the trading range.
- They want a reversal from a wedge pattern (Feb 6, Feb 13, and Feb 21).
- They hope the middle of the trading range will be an area of support.
- They need to create consecutive bull bars closing near their highs breaking far above the bear trend line and 20-day EMA to show they are back in control.
- So far, the move down is in a bear channel with overlapping ranges in the last 4 weeks.
- While that could mean weaker selling momentum, the bulls need to do more to show that they are back in control. The follow-through buying above the 20-day EMA has been limited.
- Crude Oil is currently trading around the middle of the trading range which is an area of balance and a magnet.
- For now, traders will see if the bears can create a breakout below the February 18 low with sustained follow-through selling.
- If they can do that, the odds of another strong leg towards the November low area will increase.
- Or will the market continue to stall around the middle of the trading range followed by another pullback (bounce) instead?
- The bear leg within the trading range is currently underway. The market could still trade slightly lower.
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