Market Overview: Crude Oil Futures
The Crude oil futures formed a tight trading range in the last 5 weeks. The bears want a retest of the May 4 low. They will need to create a follow-through bear bar next week. The bulls want a reversal from a higher low major trend reversal. Poor follow-through and reversals are more common within a trading range.
Crude oil futures
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a bear bar with a small tail below.
- Last week, we said that the bulls need to create follow-through buying to increase the odds of the bull leg within the trading range beginning.
- Monday gapped higher, but the bulls were not able to create sustained follow-through buying.
- The prior move down to March 5 low was in a 6-bar bear microchannel. That means strong bears.
- Last week, the bears got another leg down testing the May 4 low but did not get sustained follow-through selling.
- They hope to get a retest of the May 4 low from a double-top bear flag (May 4 and Jun 5)
- The bulls want a reversal from a double bottom (Mar 20 and May 4) and a higher low major trend reversal (May 31).
- They hope that the strong selloff from April 12 is simply a sell vacuum test of the trading range low and that the last two weeks were simply a weak two-legged retest of the May low.
- They will need to create consecutive bull bars trading far above the 20-week exponential moving average and the bear trend line to increase the odds of higher prices.
- Since this week was a bull bar closing near its low, it is a sell signal bar for next week.
- The bears will need to create follow-through selling next week to increase the odds of a retest of the May low.
- However, the market is in a 29-week trading range. The last 5 weeks formed a tight trading range.
- Poor follow-through and reversals are more common within a 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.
The Daily crude oil chart
- The Crude Oil gapped higher on Monday but reversed to close as a big bear bar. The market was trading sideways to down for the rest of the week. Friday was an inside bear bar closing near its low.
- Previously, we said that if the bulls fail to break far above the 20-day exponential moving average within a couple of weeks, the odds of a retest of the trading range low increase.
- Crude oil formed a retest of the trading range low at the end of May but fell short and then reversed back higher.
- The bulls hope that this week was the (weaker) second leg sideways to down following the reversal from May 24 high.
- They want a strong reversal breaking far above the 5-week tight trading range and trading far above the 20-day exponential moving average.
- For that, they will need to create consecutive bull bars closing near their highs to increase the odds of the bull leg beginning.
- If the market trades lower, the bulls hope that the current tight trading range (the last 5 weeks) is the final flag of the move down and want a reversal up from around the trading range low.
- The bears got a second leg sideways to down (May 31) but fell short of the trading range low.
- They then got another leg down following this week’s big gap-up on Monday, but the leg is weak with overlapping bars and doji(s) with long tails.
- They hope to get a retest of the trading range low from a wedge bear flag (May 10, May 24, and June 5).
- Since Friday was an inside bear bar, the market is in breakout mode. Because it is a bear bar closing near its low, odds slightly favor the market to trade at least a little below it.
- The first breakout from an inside bar can fail 50% of the time.
- Crude Oil has been trading within a tight trading range in the last 5 weeks.
- Poor follow-through and reversals are common in trading ranges.
- Crude Oil is also in a larger 29-week trading range. Most breakouts from trading ranges 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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