Take a look at the long-term chart of oil prices and you can quickly see that the price swings have been getting increasingly smaller for several months.
The price has formed a series of lower highs and higher lows.
The pattern that emerges from this kind of price action is a triangle or wedge, and for technical traders like us it means only one thing; the market is winding up like a spring to make a decisive break out from the pattern.
From a trader’s perspective the short answer is: it doesn’t matter. Whenever the break-out occurs, you trade it the same way, regardless of direction.
Watch for a decisive break from the pattern - either up or down - and trade in the direction of the break-out.
The keyword in that sentence is “decisive.” There are often a number of false break-outs from patterns like this, and more cautious traders will watch for a break-out, then a retracement to the break-out point and then a bounce before entering the trade.
It is more exciting to jump on the first break-out, and sometimes more profitable, but also more dangerous. Remember, in mouse traps and markets, it’s the second mouse that gets the cheese.
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U.S. Crude Oil Poised For A Breakout On Crucial Levels
Published 06/14/2013, 07:03 AM
Updated 05/14/2017, 06:45 AM
U.S. Crude Oil Poised For A Breakout On Crucial Levels
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Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
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