When global conditions become worse nothing reflects the situation better than crude oil. Just like separating wheat from chaff, it’s in the hands of analyst or observer to derive essential information from price charts. Crude oil reflects the global calamities without changing its own trend. For eg..If market is in downtrend and assume some events like militant attacks have occurred then crude oil discounts these information by becoming more volatile, but it won’t make any directional shifts!
Focusing on the Price action in Daily chart, we can make these observations
1. Before crude oil phased into range bound structure, prices were making higher highs. This preceding behavior has influenced lower time frame traders to perceive it as a trend. Eventually when price action turned down, short-term traders are forced to liquidate.
2. We can notice the game of smart money players capitalizing on false break of lower time frame trend line. As we see later, instead of breaking down price just expanded into large range due to smart money players bidding after the break.
3. Another test at 46.00 resulted in price bouncing back which indicates that bulls are still holding grip at that support level.
4. By marking the high-low at 51.50 and 45.80 respectively, we can notice that crude oil is trading between these ranges.
5. To gauge the strength of sellers, it’s essential to observe how price reacts when its tests resistance levels at 50.00 and 51.50
6. Also we need to observe whether price action breaks or holds the support level at 45.80, to determine the market direction.
