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I first discussed a bearish crude oil scenario on October 7th of last year.
At the time, oil was still trading above the 74.00 handle. By the end of 2018, the market was testing the 2017 low near 42.50.
It was the most aggressive selloff for oil since the middle of 2015.
But since carving a multi-year low on Christmas Eve, crude has bounced back.
However, the price action over the last six weeks appears to be corrective. In other words, it’s consolidation following the recent three-month selloff.
That means the next short opportunity may not be far away.
The wedge pattern you see below can be drawn on either the 4-hour or daily time frames, but it is more apparent on the 4-hour chart.
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Earlier today, sellers confirmed the break below support near the 54.00 handle.
That means any retest of the area between 54.50 and 55.50 will likely attract an influx of selling pressure.
There isn’t much in the way of key support until 50.70. A daily close below that would expose the 46.20 area.
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If this plays out as a conventional rising wedge pattern, the objective is the 2018 low near 42.50.
All of the above is contingent on sellers keeping the price below 55.50 resistance on a daily closing basis. A failure to do so would turn crude oil higher.
Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students.Read more...
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