Crude Oil formed a classic “Rounded Reversal” or “Rounded Arch” Distribution pattern and the big sell signal triggered this morning with a breakdown that morphed into a collapse.
Here’s the chart and aftermath:
In the weekly membership strategy (become a member today to receive detailed analysis and plans), we had a bullish target into the $51.00 per barrel region which set the stage for profit taking and an aggressive bearish play.
We were correct in that price rallied up toward our target and then stagnated there from Monday to Wednesday.
Price peaked above $51.50 on a massive (lengthy) negative momentum divergence and “Arc” price pattern.
This morning rewarded the aggressive bears – and profit-taking bulls – with an initial downside gap (a short-sell trigger signal), a retracement to fill the gap (a great “second chance spot” to get short), and then a massive intraday collapse back toward the $49.50 prior high support target.
With this move behind us, it’s a great chance to study the pattern and prepare for similar events in the future.
The ProShares Ultra DJ-UBS Crude Oil (NYSE:UCO) was trading at $17.13 per share on Thursday afternoon, down $1.65 (-8.79%). Year-to-date, UCO has declined -26.67%, versus a 8.11% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of AfraidToTrade.com.