Finally a Bounce Back Reversal for Crude Oil

Aug 28, 2015: 12:23 PM CST

Like stocks, Crude Oil is finally getting a strong bullish bounce.

However, unlike stocks, Crude Oil snapped a much longer and persistent downtrend in price.

Let’s update our Crude Oil charts and note new levels in play.

The 30-min intraday chart highlights the strength of the short-term downtrend – or ongoing collapse – in price.

Price continued to carve a series of lower lows and lower highs in a falling EMA environment complete with higher volume during most of the sell-swings lower.

One of the core principles of technical analysis (charting) is that trends, once established, have greater odds of continuing than of reversing.

Oil gives us a textbook lesson in why this principle is so important.

Retracement trades – like bear flags – become the easiest trade set-ups to take during trends like these.

However, even the strongest trend has to end eventually (unless a company goes bankrupt) and oil finally snapped its intense sell-swing lower.

Price spiked off the $38.00 per barrel level, eventually spiking to a new momentum high on August 25th (gap) from a small divergence.

Price then gapped yesterday above the falling advanced trendline and then above the larger trending into $40.00.

The result was a powerful short-squeeze of bullish impulsive price action all the way to the $45.00 level currently.

Let’s put this huge rally – and even larger short-term downtrend – in the context of the Daily Chart:

There are only two examples of similar “spike-reversal” rallies during the ongoing downtrend.

Note February 2015 for a three-day powerful rally and then compare that to March 2015 for a similar up-spike.

A Dead Cat Bounce took oil up toward the $65.00 level ahead of a July breakdown and collapse toward $40.00.

Once again, a lengthy daily divergence preceded the current spike-reversal on higher bullish (buy) volume.

The upside daily target – for now – is the falling 50 day EMA and upper Bollinger Band near $47.50.

If oil continues higher, look for the $50.00 level to be a key bull-bear battle target.

For now, note the persistent downtrend (a lesson in why we do not fight them) and the power-spikes that occurred at inflection (price) lows.

Afraid to Trade Premium Content and Membership

Follow along with members of the Afraid to Trade Premium Membership for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

1 Comment

One Response to “Finally a Bounce Back Reversal for Crude Oil”

  1. Shetty Says:

    This opportunity is so good for anyone to take on to be successful, but at the same time it is very crucial that we work easily, if we make even one mistake it can create big problem, so that’s why I only prefer to work with OctaFX broker with their rebate service where I am able to earn 15 dollars profits per lot size trade, it’s easy to trade with this since we get the money even on losing trades, so that’s why I am able to work with so much comfortt.