Crude Oil and Stocks Diverge and Drop from the Highs
On the Intraday Chart, both Crude Oil and the S&P futures set up a classic reversal pattern that triggered today.
What was it and what should we be watching now? Let’s find out:
I’m showing the 30-min intraday charts of @ES (Emini Futures) and @CL (Crude Oil Futures).
Namely we’re studying the rally up from March 27th and the beginning of April.
While not identical (stocks ran slightly ahead of Crude Oil), we see a classic five-wave progression toward key targets as negative momentum divergences appeared at the highs.
After Friday’s weakness and failed rally to a new swing high, stocks tumbled today, breaking a trendline and triggering a short-term breakdown.
Crude Oil hasn’t yet experienced a similar breakdown – and may not – but we should be closely watching the $50 level for a possible breakdown event.
The complete five-wave pattern along with divergences tip the scales (short-term) toward a reversal outcome as opposed to a trend continuity one.
However, as traders, it’s our job to balance probabilities/expectations with realities.
Either way, watch these markets and add this to your educational examples of short-term progression and correlated-market trading strategies.
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Corey Rosenbloom, CMT
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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).”