Looks Like Crude Oil Is Ready To Burst Upward! – Divergence & Candle Analysis

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

 

Profile photo of MetroTraderMetrotrader (D) is one of the few practicing CMTs (Chartered Market Technicians) in the United States . The CMT certifies his knowledge of market timing and risk management approaches. He tends to look for broad market moves and take advantage of them with index funds. The strategy he principally uses is mostly quantitative, and, tested, and has avoided or capitalized on every major recession since the 1940s. He says the best way to make money is to avoid losing it in the first place.

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