Recent Breakout
At the start of this month, I highlighted the price breakout that had occurred on the daily chart of WTI Crude, and suggested that the price may well continue moving up towards the $30 level.
If you follow the oil markets, you probably already know the outcome, but in this article I thought I would provide a quick update to show you what has happened since that time.
This was how the price chart looked when I wrote my last blog post:
And this is how the price has moved since that original inside bar breakout:
As you can see, this has turned out to be a very positive breakout trade for those who decided to take it because not only did the price move up to the $30 level, but it actually broke straight through this level, which would ordinarily provide some resistance because it’s a significant round number, and was trading above $34 a short while ago.
Inside Bar Breakout #2
If you didn’t manage to take this trade, the market provided you with a second opportunity to ride this upward trend because there was actually a second inside bar breakout that occurred shortly after the first one.
Zooming in to the recent price action, you can see that after the initial price breakout, there was a fairly large red candle followed by five consecutive inside bars where the price traded within the range of the initial set-up bar, indicated by the two lines.
This was basically telling you that there was a period of indecision after the initial breakout, but when the price broke above, and crucially closed above the upper line on 14 May, traders immediately jumped on board with new long positions and drove the price higher to its recent highs.
The breakout candle closed at around $28, so this would potentially have offered a gain of more than $6, or 20% for those people who traded this second inside bar breakout.
Closing Comments
The point of this article is not to brag about how I called this breakout correctly because I am definitely not in a position to do that. I am not an oil trader myself and didn’t actually take a position on it.
I just wanted to re-emphasise how effective inside bar breakouts can be, regardless of which markets you prefer to trade.
If you can find a price chart where you have a large set-up bar / candle and several consecutive bars / candles that all trade within the range of this initial bar, the odds of success are very high when the price does eventually break out of this narrow trading range.
This is particularly true on the longer time frames because if you take the daily chart, for example, 5-10 consecutive inside bars represents 1-2 weeks of consolidation and indecision, which is a long time in the trading world.
Therefore any resulting price breakout is likely to generate a lot of interest and will often have a lot of volume and momentum behind it when it eventually occurs.
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