After a successful test of a short-term retracement zone at $91.88 to $90.56, August Crude Oil futures appear poised to breakout over a downtrend line that has been providing resistance since early February. The trend line drops in at $96.87 this week. Sustaining a move through this price with rising volume will be a strong sign that speculators are ignoring the immediate fundamentals and instead have chosen to focus on the possibility of greater demand because of an improving economy.
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The triangle chart pattern that has contained the price action for several months is known as a non-trending chart pattern. The fact that the market has retraced over the mid-point of the $106.76 to $81.87 range at $94.31 several times is a clear indication that investors lacked clarity and conviction.
At this time, the market is trading on the strong side of the pivot price, indicating that the buying is greater than the selling at current price levels. The fact that the action has been contained inside of the triangle for several months leads one to believe that the market is poised for increased volatility. If the breakout takes place as expected and fresh money follows the move then look for August Crude Oil to begin to pull away from the confining chart pattern.
Technical traders aren’t going to wait for the fundamental news to confirm the rally. They are willing to speculate that new money is going to arrive on the breakout alone.…