If you’re a crude oil trader, it’s no wonder you’ll be puzzled by recent price action. Unanticipated traps, successive selloffs followed by strong rise, unexpected volatility and changing market structure are confusing market participants. The question is – Have crude oil really bottomed? Or is it another trap to liquidate weak hand players? For answers we should look beyond price action. In the viewpoint of fundamentals, supply glut stories are overplayed and doesn’t seems affecting the Crude oil anymore.
Tagged below is a 4H chart of Crude Oil, Current price value is 38.28$ per barrel…
Oil jumped more than 16% this month, despite all the bearish stories about OPEC and Supply glut. When fundamentals diverge from price action, traders should be cautious. Crude oil is indicating a sentiment extreme and weak hand players are trapped on both sides. On the chart, March 15 2016 to March 21 2016, Oil rose from 36.00$ to 42.00$ per barrel. Price action traders call these kind of movements as Climax or climatic. Climax signals both strength and exhaustion of buying pressure.
The upward pressure on price action is because of liquidation. Speculators and Market participants are closing large-scale short positions since Feb 11, as per COT report. To be fair, the real question from many traders is whether crude oil has actually bottomed or not? The answer is – it’s not yet clear. Market sentiment is diverging in time frames, as intraday traders are Bullish, where Long term traders are still Bearish. Investors are cautiously closing off their short positions. Sentiment divergence creates more volatility in price action, makes it harder to find profitable trading setups.
At present, Crude oil is trading and testing minor trend line at 40.00$ – 38.00$, Traders should focus on price action around the zone. Also keep an eye on support level at 36.00$. Future Movements can give successful trading opportunities.
