November Crude Oil futures traded lower this week, but the market remained inside the broad $100.80 to $111.34 range. Several times this week, the market straddled a key retracement zone at $106.07 to $104.83. The main trend is still up on the weekly chart, but a market can only straddle a retracement zone for so long before traders grow tired and try to move it into another range.
On the upside, this would occur if $111.34 were taken out with conviction. The attempt to drive this market through this level was accompanied by the possibility of military action by the U.S. against Syria. With this possibility taken off the table, there doesn’t seem to be a catalyst in the works that could drive the market to new highs. Therefore, we must conclude a bias may be developing to the downside. This would show up on the charts on a close below the retracement zone. Until then, one has to expect a sideways trade.
A close below the Fibonacci level at $104.83 will put the market in a weak position and could trigger a sell-off next week. The break will be labored however until the swing bottom at $100.80 is taken out with conviction.
Chart pattern analysis indicates crude oil is trading inside a triangle. This is typically referred to as a non-trending pattern. It often indicates trader indecision as well as impending volatility. Currently, the upper level of the triangle or resistance is $107.31. A move through this level will be a sign of strength. The lower boundary of the triangle or support is at $104.30. A sustained break under this angle could trigger an acceleration to the downside.
Another uptrending angle comes in at $107.80 next week. Like a 50% level, this angle may act like a pivot. Currently, crude oil is trading on the weak side of this pivot, putting it in a position to break.
Due to the historical volatility in the crude oil market, this current sideways action should not last much longer. The longer the market trades inside the triangle, the greater the expected move. Traders have to be patient at this time or risk being chopped up in a sideways trade. With a bias growing toward the downside, traders should be prepared for a volatile move through the Fibonacci level at $104.83 then the uptrending Gann angle at $104.30. These moves should be enough to attract aggressive shorting action.