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Technically, there was a warning in January before crude oil plunged below zero

Updated: Mar 4, 2022

An inversed hammer with a higher weighting was being identified on 20 Jan 20.

This was a case study done after a presentation made on behalf of Chicago Mercantile Exchange to their partners on 08 Jan 20. During the presentation, we discussed about the behavioural science behind identifying market reversal, those price behaviour that is higher in weighting. Then, we put this understanding to the test, to identify potential market reversal for the next 10 trades. Refer to the case studies 6 posted on crude oil

The market started trending down for the next 10 days as shown below.

Crude Oil for May futures contract subsequently traded below zero because of it's expiry. Traders would not like to take delivery because they will not be able to find any storage for their oil. See chart below:

Yes, it is true that the triggered for the oil collapsed was due to OPEC+ collapsed where Russia refused OPEC proposed cut and Saudi Arabia launches the price war. However, these dispute was between 06-07 Mar 20, see market gap down on the above chart during March.

How about the market reversal signal identified on 20 Jan 20 and market started trending down after that?

Days before the reversal down signal was identified, market was at it's very early stage of COVID-19 crisis, generally investors were more concerned about the spreading of the virus affecting the supply chain from China to the rest of the world than it developing into a pandemic. I did receive questions on how to apply this understand about the reversal down signal when the market was still holding well? Discerning that a pending downtrend may be inevitable.

I use this understanding to time the market in relation to the virus concern. Russia and Saudi price war leading to crude oil prices trading below zero was the domino effect of the COVID-19 crisis.

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