Thursday 5 August 2010
Current activity in Crude Oil caught our attention for potential upside
continuation that began on Monday, the 2nd. While looking for trade
set ups, the intra day was showing a probe of the lower end of the
developing trading range after price had been holding for the past
three trading days. This can be a resting spell, or it can turn price
around and head back to the breakout. The intra day developing
pattern, not shown, is providing a reasonably low risk entry that will
give an edge, if the analysis turns out to be correct.
Breakouts from a trading range are always a signal from the market
showing strength, in this instance, and buying strength is important
when anticipating upside continuation. From the May low, Crude has
made higher swing lows, just prior to what we are saying is a breakout.
Any potential breakout has added strength when confirmed by the
next higher time frame, the weekly in this case. It is apparent from
the week-ending 17 May low that it closed at the upper range,
showing that buyers had wrested from gained the upper hand after
sellers had been in control.
Observe most of the weekly ranges, and you will see that the closes
were upper end, confirming that buyers were winning the weekly
battle over the efforts of sellers. We do not know where this can go.
All that can be done is to take a position when it appears opportune
and let the developing market activity tell the story as it unfolds. The
last failed high was in the 87 area, and that would be the first
important test, IF price confirms the breakout.
We took the daily and weekly chart patterns and used the intra day
as a timing tool to gain an edge for upside continuation, or minimize
risk exposure, if proven wrong.