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Crude Oil Breakout From the Trading Range

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Market Overview: Crude Oil Futures

Crude Oil breakout from the trading range this week and the bears need follow-through selling. They want a measured move based on the height of the recent trading range, which will take the market to the $55 area. The bulls need to create strong bull bars trading above the 20-week EMA and the bear trend line to show they are back in control.

Crude oil futures

The Weekly crude oil chart

Crude Oil Weekly - DT Bear Flag, Bears Need FT Selling, Crude Oil Breakout From the Trading Range
  • This week’s candlestick on the weekly Crude Oil chart was a follow-through bear bar closing in its lower half with a long tail above.
  • Last week, we said traders would observe whether the bears could create follow-through selling below the 20-week EMA, or if the market would stall around the August 13 low area and reverse above the 20-week EMA instead.
  • The market traded higher, testing the 20-week EMA early in the week, but lacked sustained follow-through buying. The market broke below the August 13 low on Friday.
  • The bulls view the current move (Oct 10) as the third leg sideways to down.
  • They hope the lower third of the large trading range will act as support.
  • They want a reversal from a large wedge pattern (Jun 24, Aug 13, and Oct 10).
  • They need to create strong bull bars trading above the 20-week EMA and the bear trend line to show they are back in control.
  • The bears view the recent move (Sep 26) as a pullback, forming a larger double top bear flag (Jul 30 and Sep 26).
  • They want the 20-week EMA or bear trend line to act as resistance.
  • They want a measured move based on the height of the recent trading range, which will take the market to the $55 area.
  • They must continue to create follow-through selling below the 20-week EMA to increase the odds of testing the trading range low (Apr 9).
  • The market remains in a large trading range.
  • Traders will BLSH (Buy Low, Sell High) until there is a breakout from either direction of the trading range, accompanied by sustained follow-through buying/selling.
  • That means selling in the upper third and buying in the lower third of the trading range.
  • The market is breaking out from the 14-bar tight trading range formed around the 20-week EMA.
  • Since this week was a bear bar closing in its lower half, it can be a sell signal bar for next week.
  • The market could still trade at least a little lower.
  • Traders will see if the bears can create follow-through selling in the next few weeks.
  • Or will the market trade slightly lower, but lack sustained follow-through selling instead?
  • Poor follow-through and frequent reversals are hallmarks of trading ranges.

The Daily crude oil chart

Crude Oil Daily - Large DT Bear Flag, Bears Need FT Selling
  • The market traded higher to test the 20-day EMA in the first half of the week, but couldn’t close above it. Friday broke far below the August 13 low.
  • Previously, we said traders would observe whether the bulls could create more follow-through buying trading above the 20-day EMA and the September 2 high, or if the market would stall (around the September 2 high area), followed by a reversal below the 20-day EMA.
  • The market stalled around the September 2 high area (Sep 26), followed by a two-legged move below the 20-day EMA.
  • The bulls see the current move (Oct 10) as the third leg down, forming a wedge pattern.
  • They want a reversal from a large wedge pattern (Jun 24, Aug 13, and Oct 10).
  • They want the lower third of the large trading range to act as support.
  • They need to create strong consecutive bull bars trading far above the 20-day EMA to show they are back in control.
  • The bears got a reversal from a large double top bear flag (Jul 30 and Sep 26) and a smaller double top bear flag (Sep 2 and Sep 26).
  • They want a strong leg down to test the bottom of the trading range (Apr 9).
  • They want the 20-day EMA and the bear trend line to act as resistance.
  • They must create sustained follow-through selling to increase the odds of testing the trading range low (Apr 9).
  • 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 buying in the lower third and selling in the upper third of the trading range.
  • The market broke below the 48-bar trading range and the August 13 low on Friday.
  • The market could still trade at least a little lower.
  • For now, traders will see if the bears can create sustained follow-through selling.
  • Or will the market trade slightly lower but lack follow-through selling, forming a pullback near the 20-day EMA instead?
  • Poor follow-through and frequent reversals are hallmarks of trading ranges.

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