Crude Oil Nearing Exhaustion

For an asset like Crude, which is normally extremely volatile, the current prolonged sideways range is very much out of character. Crude has us accustomed to daily swings of 2% to 3%, and to shorter term rallies/declines that draw in traders before reversing suddenly. Crude is generally an asset that fluctuates in price, so the current “flat-line” action is rare. Since the last Daily Cycle peaked on May 6th, Crude oil has been locked in a sideways trading range. Short term traders, expecting the usual crude oil volatility, are being chopped to pieces.

As a result, Crude’s Bollinger Bands are now the tightest they’ve been in over 2 years. And, as with every asset I track, tight Bollinger Bands are almost always a precursor to a significant move. I’m confident that Crude’s next move will be extremely sudden, and is likely to extend far outside the Bollinger Bands before coming to an end. The only question is the direction. I believe that it will be higher, but this view is pure speculation. And the longer the move takes to develop, the more likely it is to, instead, be a bearish move down. From a position standpoint, traders should focus on a sizable move and volatility, as opposed to being fixated on any one direction.

Within my premium member reports, I have been warning for months that the rally off the March lows is counter-trend in nature. I continue to believe that Crude oil has entered into a bear market period and that once this reactionary move is exhausted, crude will continue its new primary trend lower. That said, I believe that counter-trend move has some life left, so I am siding with the view that Crude will see an upside breakout before finally reaching exhaustion.