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Analyzing Crude Oil (CL) Futures Market Patterns

Technical indicators and chart patterns can provide analytical insight into the Crude Oil futures (CL) market by measuring price action, volume and volatility. The results of the market analytics can potentially serve as entry and exit signals, and identifying overall trend direction.

Below are 3 technical analysis tools commonly used when day trading the futures markets:

  1. Simple Moving Averages (SMA)
  2. Bollinger Bands®
  3. Channel Patterns

Simple Moving Averages (SMA)

A simple moving average can be utilized to identify potential buy/sell signals and trend reversals. An indication of a potential market reversal is when the 100 Day SMA crosses over the 50 Day SMA. This crossover is often showcased as the shorter-term SMA (50 Day) charting lower than the than the longer term SMA (100 Day).

The following chart featuring the daily WTI Crude Oil futures contract (CL) from February – August of 2017 is an example of an SMA crossover:

Crude Oil Chart

Bollinger Bands®

Bollinger Bands® are commonly used to measure volatility. The bands will ‘tighten’ around the contract’s price action when volatility is high, and ‘loosen’ when volatility is low. As Bollinger Bands® converge around price action it can potentially be an indication of a market reversal.

The chart below of the WTI Crude Oil futures contract (CL) during February – August of 2017 is an example of using Bollinger Bands® to spot potential market reversals:

Bollinger Bands Chart

Channel Patterns

Trading channels are designed to identify existing market trends. A clear indication that a market is trading within a channel is when price action moves within the upper and lower channel lines. If price action reaches the boundary of a channel, trading volume may decrease significantly. If the trend breaches the trading channel, this could be an indication of a reversal.

The chart below of the WTI Crude Oil futures contract (CL) during February – August of 2017 is an example of using a Trading Channel to distinguish a prevailing market trend:

Channel Pattern Chart

As always, remember past performance is not indicative of future results and you should always trade within your risk tolerance levels.

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