Correction Underway in Crude Oil UptrendAs I expected a week ago, crude futures have begun to pull back from the upper bound of the trend channel on the weekly chart, and the market is entering a consolidative phase. A test of the 76.90 level looks like a probable target. If this level holds as support, that would confirm the uptrend is still intact. A break below this could take the market at least to the $72 area. If we test the 76.90 level early this week, I would expect a stronger rally off of this level. If the market spends too much time exploring price around the $77 area next week, then a more likely scenario would be a sideways drift toward the lower bound of the trend channel as we head into rollover week. A rangebound market would have to drift for considerable time to reach the lower bound of the channel, but this might be a likely scenario given the ground we've covered already. Personally, I would welcome some rangebound trading in crude. It makes for some easy profits. How the next few days play out will be pivotal.
It's difficult to call tops or bottoms in a strongly trending market, but being able to recognize as early as possible when the market is going through a state change from trending to rangebound is vital to your profitability and long term success as a trader.
