Crude oil price movements are now linked with strong dollar, US oil Production and supply disruptions due to geo political scenarios. Despite crude oil prices are falling from 50$ per bbl range, fundamentals are constantly pointing out on the opposite direction. Investors are at cross roads either to follow the price action or stick with fundamentals. Current Price value is 46.59$ per bbl.
Below is the 4h chart of crude oil ideal for swing trading
1. As I pointed out in my earlier article that technicals are driving the price action instead of fundamentals. Recent movement in crude oil is contradicting to fundamentals. After testing the 50$ mark, prices fell sharply and eventually breaking the channel. The momentum behind the structure is valid and caused by liquidation of smart money players.
Traders perceive the recent price action as downtrend in Lower time frame
2. For further clarity and in-depth, I have highlighted market structure using a hypothetical diagram. From the perspective of lower time frame, traders will infer it as downtrend but in 4h chart it is still a structural tendency driven by the divergence between fundamentals and price action. If crude oil gets bid at the lower prices, then it’s a sign of sentiment shift, if not then it’s safe to play the structure until any directional changes.
3. All the facts lead to one question – whether the current structure changes or continues to move in the same direction? Well the answer lies in price action! Traders should see how market behaves to fundamental inputs such as inventory reports, Geopolitical reasons etc. If price action responds to new information then possibility of market structure changing increases or else technicals will continue to drive the investors behavior.
