December Power Recovery off Support in Crude Oil

Dec 4, 2013: 2:00 PM CST

Crude Oil faced a major “make or break” support reversal challenge and buyers clearly stepped in at this pivotal inflection level.

Let’s take a look at what happened and update the current targeting levels for Crude Oil:

Crude Oil Futures CL WTIC Key Support Trend Reversal Bounce

The critical support/inflection level (mentioned frequently to Weekly Intermarket Strategy Members) intersected the $92.00/$92.50 level.

The support stretches back to earlier 2013 where multiple swing reversals occurred into this same support point.

After an initial swing up mid-November, price again retested the $92.00 level a final time before buyers decided to step in aggressively, defending support and springing the powerful rally of the last few sessions.

Here’s the same perspective on a TradeStation Chart:

Crude oil CL Futures TradeStation Trading Crude Support Buyer Reversal Key Inflection

We again note the $92.00/$92.50 per share critical support level which also corresponded with the lower Bollinger Band.

Also, note the lengthy positive momentum divergence that developed from October to present.  One of my favorite swing trading (and even intraday) patterns is a lengthy positive divergence that develops into a known (critical) inflection level.

At the moment, price has already achieved its upside target – in about three quick sessions.  We tend to target price inflection levels and Crude Oil has moved up off support toward the next resistance target into the falling 50 day EMA and upper Bollinger into the $97.00 per barrel level.

Also note the “Trading Ranges” (blue highlight) as drawn.  For planning purposes, the next move for Crude Oil will either be an inflection down against the current target (achieved today) back within the prior trading range boundaries or else a continuation of the powerful up-swing which would generate a new breakout opportunity.

For clearer targets and structure, let’s turn to a Color-Chart of key target levels:

Crude Oil Market Profile Trigger Charts Open Air Pockets Daily Color Chart

Similar to a standard “Market Profile” chart, the color-chart above uses indicators from for color-coded “Value Areas” (price and volume ‘nodes’ colored yellow) and “Open Air Pockets” (blue).

The main idea is that price tends to settle into equilibrium or ‘balance’ areas (the yellow and red bars) and then eject/break away from value on a quick, impulsive movement (which shows up as blue “open air” pockets) toward the next value area.

We see this happening on the quick movement from $92.00 through the recent “Value Area” yellow line near $94.50 and straight up to the two current Yellow Lines that developed at the earlier part of 2013.

The implication here is similar to what we would expect on a typical chart:

A breakthrough above the current “prior value area target” here into the $97.50/$98.00 area suggests that oil could gather strength and trade impulsively higher toward the $103 prior Value Area (through the blue “Open Air Pocket”).

Otherwise, we see indicator (50d EMA/upper Bollinger Band) and prior “Value Area” resistance clustered all at the $98.00 per barrel level which makes the current levels our main focal points for developing short-term trading strategies.

Look to be profit-taking ‘bearish’ with respect to the range and any downside movment down away from the $98 target and otherwise “breakout into Open Air bullish” on a clean movement up and away from $98.00 then above $100.00.

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Corey Rosenbloom, CMT
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