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Weekly Crude Oil Bears Want a Second Leg Down

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Market Overview: Crude Oil Futures

The weekly Crude oil bears want a second leg down following this week’s pullback. Bears need consecutive strong bear bars breaking below the December 16 low to increase the odds of another strong leg down. Bulls need consecutive strong bull bars closing well above the 20-week EMA and the bear trend line to show they are gaining control.

Crude oil futures

The Weekly crude oil chart

Crude Oil Weekly - Bears Want 2nd Leg Down, Weekly Crude Oil Bears Want a Second Leg Down
  • This week’s Crude Oil candlestick was a doji closing near its low with a long tail above.
  • Last week, we noted traders were watching whether bears could produce follow-through selling below the October 20 low, or whether the market would stall near that level and retest the 20-week EMA and the bear trend line in the weeks ahead.
  • The market traded higher to test the bear trend line, but the follow-through buying was not sustained.
  • Bulls view the December 16 selloff as a large wedge bull flag (August 13, October 20, and December 16) and a bear leg within a broader trading range.
  • They see the market forming a large higher low major trend reversal relative to the April 9 low.
  • Bulls need consecutive strong bull bars closing well above the 20-week EMA and the bear trend line to show they are gaining control.
  • Bears recently produced the third sideways-to-down leg (August 13, October 20, and December 16).
  • They view this week as a pullback and want a second leg sideways to down.
  • Bears want a retest near the trading range low (April 9).
  • Bears need consecutive strong bear bars breaking below the December 16 low to increase the odds of another strong leg down.
  • If the market trades higher, bears want the 20-week EMA and the bear trend line to act as resistance.
  • Crude Oil remains in a large trading range.
  • Until there is a clear breakout with sustained follow-through, traders will likely continue to Buy Low, Sell High (BLSH) — buying near the lower third and selling near the upper third of the range.
  • Buyers may appear around the lower third of the trading range.
  • Traders will watch whether bears can produce follow-through selling below the December 16 low, or whether the market stalls and retests the 20-week EMA and the bear trend line in the weeks ahead.
  • Poor follow-through and frequent reversals remain hallmarks of a trading range environment.

The Daily crude oil chart

Crude Oil Daily - Bears Want Retest Low, Bulls Want 2nd Leg Up
  • The market traded sideways to up above the 20-day EMA in the first half of the week. Friday traded slightly higher but reversed into a big outside bear bar closing below the 20-day EMA.
  • Last week, we noted traders were watching whether bears could generate decisive follow-through selling below the October 20 low, or whether the market would stall near that level and reverse back above the 20-day EMA instead.
  • Bulls view the recent price action as forming a large wedge bull flag (August 13, October 20, and December 16) and a large higher low major trend reversal relative to the April 9 low.
  • They want the December 16 low, or the lower third of the large trading range, to act as support.
  • Bulls need consecutive strong bull bars trading well above the 20-day EMA and the bear trend line to show they are regaining control.
  • Bears recently produced a large third sideways-to-down leg (August 13, October 20, and December 16).
  • They want a strong leg down to test the trading range low (April 9).
  • Bears view this week as a pullback and want the 20-day EMA and the bear trend line to act as resistance.
  • Bears need consecutive strong bear bars breaking well below the December 16 low to increase the odds of another strong leg down.
  • The market remains in a large trading range.
  • Until there is a clear breakout with sustained follow-through, traders will continue to Buy Low, Sell High (BLSH) — buying near the lower third and selling near the upper third of the range.
  • Buyers may appear near the lower third of the trading range.
  • For now, traders will watch whether bears can generate further follow-through selling below the December 16 low, or whether the market stalls around that area and reverses back above the 20-day EMA.
  • Poor follow-through and frequent reversals continue to define a trading range environment.

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