Market Overview

Friday's Market Minute: Crude Oil Calm Before The Storm?

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Friday's Market Minute: Crude Oil Calm Before The Storm?

Crude Oil futures have seen extreme volatility during 2020, eventually resulting in the unprecedented situation of slipping into negative prices. Yet now the /CL contract seems almost sleepy by comparison as it trades near the beginning of March’s massive gap down, bouncing within the tightening range of a Rising Wedge pattern that began in mid-June. More recently, it has been unable to crack the confluence of the 252-day Exponential Moving Average near 43.25 and the Linear Regression 50% Channel near 43.50 on the upside. But Crude Oil also has held firm on the downside at the 21-day EMA near 41.80 as well as a significant Volume Node near 41 as it gradually grinds higher. While this narrow sideways trading may not be exciting to watch, volatility contraction could present patient traders with an opportunity for breakout setups. Technical analysis suggests that low volatility can be a precursor to high volatility as bulls and bears become more entrenched in their respective positions, and all that remains is the final push to make prices break out to one side or the other. Watch for prices to get either above 43.50 or below 41, and this product could get exciting again in a hurry.