Determining the Crude Oil Price Next Big Move / Commodities / Crude Oil

Crude oil started this week with abearish price gap and a breakdown below the September and October lows. This isan extremely valuable indication. The black gold seems to have finally decidedwhat the next big move is going to be, and by breaking lower, it effectively“agreed” with our expectations.

On its own, the breakdown is verybearish. However, what preceded is equally important, as it shows that thismove has much more potential than just a few-dollar drop.

First of all, crude oil stopped rallyingafter correcting approximately 61.8% of the previous 2020 decline, which meansthat it was quite likely a real top instead of a fake one that will be brokenshortly.

Second, the initial decline was followedby a zigzag, which is a classic corrective pattern. Since the preceding movelower was to the downside, the end of the correction insinuates anotherdecline.

Third, the Stochastic indicator is on asell signal.

Finally, it’s all similar to what we’vewitnessed in Q1 2020, not just the breakdown in crude oil, but the fact that ithad first corrected slightly above the 61.8% of the preceding decline and thatstocks were forming a double-top pattern.

Of course, we’ll be aware of the finalpoint (stock’s double top) only after they decline further. However, the shapeof the price moves (lower part of the above chart) is already similar.

Furthermore, the Covid-19 cases aresoaring once again as well. Even though the fear of the unknown is not presentthis time, the scale of the phenomenon is much greater, and thus, the emotionalreaction is also getting more serious. The charts above reflect that perfectly.Just as it was the case in January and February, crude oil is the first to showweakness, but it’s definitely not the last to do so.

The USD Index has already confirmed itsbreakout and is rallying almost daily, so things do really look like they didin the first quarter of the year.

Tosummarize, for the upcoming weeks, the outlook forcrude oil remains bearish.

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Nadia Simmons
Forex & Oil Trading Strategist
PrzemyslawRadomski
Founder, Editor-in-chief

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