Market Overview: Crude Oil Futures
The market is forming a Crude Oil weak bear channel on the weekly chart (overlapping ranges and consecutive doji bars). The bears must continue to create follow-through selling to increase the odds of testing the November 18 low area. The bulls want the 20-week EMA and the middle of the trading range area to act as support.
Crude oil futures
The Monthly crude oil chart
- The February monthly Crude Oil candlestick was a bear bar with a small tail below.
- Last month, we said that traders would see if the bulls could create a retest of the Jan 15 high, or if the market would trade back into the triangle pattern, testing the 20-month EMA instead.
- The bears want the market to form another lower high and a failed breakout from above the triangle pattern.
- They want a reversal from a double top bear flag (Apr 12 and Jan 15) followed by a retest and breakout below the bottom of the triangle.
- They need to create follow-through selling trading below the 20-month EMA to increase the odds of testing the trading range low.
- The bulls hope to get a retest of the January 15 high, even if it forms a lower high.
- They see the current move as a pullback and want the 20-month EMA to act as support.
- They need to create strong bull bars with follow-through buying to increase the odds of testing the trading range high.
- So far, the market is trading around the middle of the large trading range (around the 20-month EMA) which is an area of balance and a magnet.
- The candlesticks have overlapping ranges, poor follow-through and frequent reversals which further indicates trading range price action.
- Traders will BLSH (Buy Low, Sell High) until there is a breakout from either direction with sustained follow-through buying/selling.
- That means buying in the lower third and selling in the upper third of the trading range.
- For now, traders will see if the bears can create follow-through selling trading below the 20-month EMA.
- Or will the market stall around the 20-month EMA followed by a retest of the January 15 high instead?
The Weekly crude oil chart
- This week’s candlestick on the weekly Crude Oil chart was a doji bar closing around the middle of its range.
- Last week, we said because of the repeated failure to trade higher in the prior 3 weeks (forming lower highs), the market could attempt to break lower.
- The bears got another leg sideways to down trading below the February 18 low this week.
- However, the candlestick was a doji bar which means the bears are not yet as strong as they hoped to be.
- They want another strong leg down to test the November 18 low area from a wedge bear flag (Feb 3, Feb 11, and Feb 20).
- So far, the move down is in a bear channel albeit weak (many overlapping ranges and consecutive doji bars).
- The bears must continue to create follow-through selling to increase the odds of testing the November 18 low area.
- If the market trades higher, they want the 20-week EMA or the bear trend line to act as resistance.
- The bulls see the current move as a two-legged deep pullback.
- They hope to get a retest of the January 15 high, even if it forms a lower high.
- 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 act 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 recent candlesticks have overlapping ranges and formed consecutive bear doji(s). That is a sign of a weaker bear channel
- For now, traders will see if the bears can continue to create follow-through selling trading below the 20-week EMA.
- Or will the market reverse back above the 20-week EMA and trade higher within the next few weeks instead?
- 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.
- Poor follow-through and frequent reversals are hallmarks of a trading range price action.
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