LIGHT CRUDE OIL

In his book Bollinger on Bollinger Bands, Mr. John Bollinger writes “high volatility begets low and low volatility begets high”. In other words volatility follows a cycle. I was lucky enough to meet Mr. Bollinger in person at one of the Market Technicians Association Annual Symposium in New York. I have read his book several times and in the past 5 years have looked at almost every chart that I analyzed at least once with this template that I’m sharing with you on this post. Volatility is a great tool in risk management and the timing of entry and exits in each trade. I believe the success in technical analysis and applying your analysis to trading is not related to how many technical tools you know but how well you know that tool and how efficient you use it. Below are two case studies where I have shared timely market analysis with the readers.

Bollinger bands with its derivatives b% & Bollinger band width indicators helped me in timing the markets and managing my entry & exits. Here, in this post I’m sharing with you another analysis on Light Crude Oil with the volatility template. Crude Oil has been forming a nice contracting range (ascending triangle?) since mid-November. Technical chart pattern suggests a breakout sooner or later. Supported by the technical chart pattern our volatility analysis also suggests that Light Crude is now at an extreme low volatility. So we should expect high volatility. (low volatility begets high and high volatility begets low)

So how do we evaluate all this information? First, we should be ready for a strong move in the following weeks. Second we should wait for a confirmation, a breakout signal. Strong support is at $96 levels and resistance area is between $101.75 and $103.75. Price will clear one of these in the next few days. A break above 103.75 will suggest strong upward trend towards $110 levels and a break below $96 will suggest downward trend towards $92 levels.