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Crude Oil Bulls Want a Second Leg Up

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Market Overview: Crude Oil Futures

The Crude Oil bulls want a second leg up from a double bottom bull flag (Oct 30 and Nov 6). Bears want at least a small second leg sideways to down to retest the October 20 low, even if it only forms a higher low. Poor follow-through and frequent reversals are hallmarks of a trading range.

Crude oil futures

The Weekly crude oil chart

Crude Oil Weekly - PB, Bulls Want 2nd Leg Up, Middle of TR
  • This week’s candlestick on the Crude Oil weekly chart was a bear bar closing in its lower half, with a prominent tail below.
  • Last week we said traders would watch whether bulls could create consecutive bull bars closing above the 20-week EMA and the bear trend line in the weeks ahead, or if the market would stall and form a retest of the October 20 low.
  • So far, the market is stalling around the 20-week EMA and forming a retest toward the October 20 low.
  • Bulls see the recent selloff (Oct 20) as a large two-legged bear leg within the trading range (first leg: Jun 23–Aug 13).
  • They want the lower third of the trading range to continue acting as support, which has held so far.
  • They want a second leg sideways to up breaking above the October 24 high from a double bottom bull flag (Oct 30 and Nov 6).
  • They need strong consecutive bull bars closing far above the 20-week EMA and the bear trend line to increase the odds of testing the trading range high.
  • Bears see the recent move (Oct 24) as a pullback and want the 20-week EMA and bear trend line to act as resistance.
  • They view the recent rally as forming a large wedge bear flag (Jul 30, Sep 26, Oct 24).
  • They want at least a small second leg sideways to down to retest the October 20 low, even if it only forms a higher low. That move is currently underway.
  • If the market trades higher, bears want the 20-week EMA and bear trend line to act as resistance.
  • Crude Oil remains in a large trading range.
  • Traders will likely continue to BLSH (Buy Low, Sell High) within the range — buying near the lower third and selling near the upper third — until a clear breakout with sustained follow-through occurs.
  • Currently, the market is trading near the middle of the range, an area of balance and a magnet.
  • Traders will watch whether bears can create a strong retest of the October low.
  • Or will the market reverse to retest the 20-week EMA and the October 24 high instead?
  • Poor follow-through and frequent reversals are hallmarks of a trading range.

The Daily crude oil chart

Crude Oil Daily - Small Double Bottom Bull Flag
  • The market traded sideways to down for the week, closing slightly below the 20-day EMA.
  • Previously, we said traders would watch if bulls can create sustained follow-through buying above the 20-day EMA and break above the bear trendline, or if the market would stall, followed by a sideways-to-down leg to retest the recent low (Oct 20).
  • Bulls created a reversal from both a large wedge bull flag (Jun 24, Aug 13, Oct 20) and a smaller wedge bull flag (Oct 2, Oct 10, Oct 20).
  • They see the current move as a small pullback forming a double bottom bull flag (Oct 30 and Nov 6).
  • They want a second leg sideways to up, followed by a strong bull leg to retest the top of the trading range.
  • If the market trades lower, they want it to form a higher low (relative to Oct 20) and a wedge bull flag (first two legs: Oct 30 and Nov 6).
  • Bulls need strong consecutive bull bars trading above the 20-day EMA and the bear trendline to show they are regaining control.
  • Bears see the recent move (Oct 24) as a pullback and want a reversal from a large wedge bear flag (Jul 30, Sep 26, Oct 24).
  • They want a retest of the recent low (Oct 20), even if it only forms a higher low.
  • They want the bear trendline and 20-day EMA to act as resistance.
  • If the market trades higher, bears want the Oct 24 high to act as resistance.
  • They need to create strong consecutive bear bars to increase the odds of another strong leg down.
  • The market remains in a large trading range.
  • Traders will continue to BLSH (Buy Low, Sell High) until there is a clear breakout in either direction with sustained follow-through buying or selling.
  • That means buying in the lower third and selling in the upper third of the trading range.
  • The middle of the trading range is an area of balance and a magnet.
  • For now, traders will watch if bears can create more follow-through selling below the 20-day EMA.
  • Or will bulls create a retest above the October 24 high with follow-through buying instead?
  • Poor follow-through and frequent reversals are hallmarks of trading ranges.

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