Intraday Divergence and Reversal Planning for Crude Oil

Aug 18, 2014: 12:55 PM CST

Crude Oil may be forming an intraday reversal pattern – with divergences – off an important short-term support level.

Even if you don’t trade Crude Oil, let’s study the Color Structure chart and learn a lesson on intraday trends, divergences, and reversals.

We see a Color Structure chart on the 5-min (very short-term) intraday scale with brief but persistent intraday trends.

Momentum (3/10 Oscillator) Divergences formed at the reversal points for the short-term price trends.

Now, we’re planning a potential reversal play (aggressive opportunity) up off the $93.40 @CL futures level (look for a comparable level in the USO or related ETFs) given the positive momentum divergences and recent “trendy” behavior.

Also note the breakthroughs of narrow (yet parallel) price trendlines to set the stage for a reversal (trendline breaks can be entry/exit signals).

Stops would be placed under the prior low and targets extend toward $95.00 for aggressive traders.

Do note the retracement or ‘flag’ trades that set-up briefly as price travels “away from” a reversal level and “toward” a new price target as the trend develops.

Monitor the current activity for a support-bounce reversal or else an alternate “breakdown” thesis under the $93.40 level.

Corey Rosenbloom, CMT
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