By Christopher Diodato
Yes, it seems that I have had a recent infatuation with crude oil. The price has been falling, but it found support right at the triple confluence zone I talked about last week. Now, watching momentum indicators, it looks like crude oil has, at least for the short term, bottomed.
A divergence occurs when price continues to trend in one direction, but momentum, which generally leads price tops, reverses. Here is the chart of USO (Sorry, I don’t have the actual chart of crude on this computer). Notice how the RSI (a momentum indicator) bottomed early last week. Now, the RSI is climbing, and is using the 40 level as support. This is indicative of the stage being set for a bullish reversal.
In addition to this intra-day signal, a candlestick signal also says that today was a potential bottom. The actual pattern is called a “hammer”
So, “longers” in crude, it looks like the pain is about to end. Good job holding steady and not selling!
Happy trading!
~Chris Diodato
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