Crude oil futures had a big selloff on Wednesday, falling out of a breakout setup as the weekly inventory report and hawkish Fed statement led to a broad based commodity rout. The selloff on Wednesday gave crude a Taylor Trading Buy day setup for Thursday and we saw the anticipated rally.
In last night’s edition of Swing Trader’s Insight (STI), the comment for crude oil was “cover breakout sales” / Buy day. We anticipated that the breakout sale of Wednesday would lead to an initial push below the Wednesday low. If this selloff stopped and reversed we would look to go long when the market rallied back above the Wednesday high- the standard Buy day setup for the Taylor Trading Technique.
When I was writing this morning’s note for STI, I suggested we also watch the $50 level as a reference price- both because it is psychological pivot point and the 20 day EMA (one of my favorite moving averages) was there. If the $50 level held we would have an additional, lower support / purchase price.
$50 tested and held around 8 AM, giving our first buy signal. The first rally off this low failed to clear the Wednesday low, meaning there was no standard TTT entry at 10 AM. The next leg up traded above the second reference price, triggering the next long entry. The second leg up saw better momentum, reaching the 51.37 overnight high / Fibonacci retracement level just after Noon.
Is the past month’s crude oil rally in trouble? I suspect it is. The 20 day EMA has been a good indicator for trend; the 49.50 level would be the next support to watch. The midpoint of the November / December rally is 48.73 and would be a longer term support level.
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