Here's What I See Happening In Crude Oil

I’ve been watching crude oil closely over the last month. In mid-November I highlighted the short-term channel that crude was in and the bias appeared to be for a break to the upside based on the positive divergences in momentum and volume. The price of a barrel of crude oil was also resting on the trend line support off the June ’12 and April ’13 lows. We saw a false break to the downside of the channel but support was still in tact. This is why patience and not having blinders on can be important in trading!
 
With the recent strong move in crude I thought it would be good to revisit the chart. As you can see below, we still have the positive move in the Relative Strength Index as well as a break of the short-term 20-day moving average. Two days ago I tweeted that we had an island candle pattern, which is typically bullish when occurring in an established down trend, taking place in oil as well as a strong confirmation.
 
Right now we are approaching the 50- and 200-day moving averages which could introduce a supply of selling that buyers will need to work through to see higher prices. The low-level of bullish sentiment I showed in a chart in November has improved but we still aren’t seeing a rush of bullishness into the oil market, which could mean there is still some room to run.

Things look constructive and if we are able to clear the two moving averages then a new up trend could be established. I’ll be watching to see where price takes us.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer.