The Crude Oil Slide as seen on the 30min Charts

The fall in Crude Oil from the recent $73 highs has been relentless!  We’re down again Friday morning before market open – let’s take a look at the 30-minute internal structure to see what’s going on and what might be in the cards.

(Click for Full-Size)

Here we see the continous contract (@CL) and how we are opening for Friday July 10th’s session – another apparent down-day.

From an educational standpoint, here’s a head and shoulders I’ve heard no one mention!

As June ended and July began afresh, a clean Head and Shoulders reversal pattern began on Crude’s internal charts.   A quaint bear flag formed the Right Shoulder which is unusual (it’s more of an “AB = CD” Pattern but still qualifies as a bear flag).

The break of the $68.50 area here triggered a neckline break and short-sale entry with a stop perhaps above $70 or slightly higher.

As price fell, any pullback (retracement) to the 50 EMA became a fresh short-sale signal with a stop trailed just beyond this EMA – notice the simple trades that could have been made in succession.

The principle “Trends Have Greater Odds of Continuation than of Reversing” certainly plays in full-force here.

What appears to be happening now is a type of Arc formation which might lead to a gentle “Rounded Reversal” pattern similar to what formed coming into 2009 on the daily (and, to an extent, weekly) charts.

The 3/10 Momentum Oscillator has been forming higher lows since July began, which is a sign that the downtrend swing is moving closer to ending (or retracing back upwards momentarily) but does not seem finished yet.

Downside momentum is slowing, as is the violence of the down-swings, but until these EMAs cross bullishly and price cleanly settles above them, odds still favor shorting rallies into resistance.

Corey Rosenbloom, CMT
Afraid to Trade.com

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