Bilateral/Consolidation Crude Oil Trading Chart Patterns Oil Trading
With bilateral/consolidation oil trading patterns the crude oil market can move in any direction. There are two different types of consolidation crude oil chart patterns that form on oil charts:
- Symmetric Triangles - Consolidation oil trading chart patterns
- Rectangles - Range/ranging market
Consolidation Oil Trading Patterns
Symmetrical triangles are crude oil chart patterns with converging oil trend lines that form a consolidation period. The technical buy point from a symmetrical triangle is the upside break, while a downside break is a technical sell oil signal. Ideally, a market breaks out from a symmetrical triangle prior to reaching apex of the triangle.
Oil Trading Trend Lines can be drawn connecting the lows & highs of the consolidation phase, the oil trend lines formed are symmetric and converge to form an apex. A breakout should occur somewhere between 60-80% into the triangle crude oil pattern. An early or late breakout is more prone to failure, and therefore less reliable. After a oil price breakout the apex forms support and resistance levels for the oil price. Oil Trading Price that has broken out of the apex should not retrace beyond the apex. The apex is used as a stop loss setting area for the open Oil trades.
When these consolidation patterns form we say that the crude oil market is taking a pause before deciding next direction to take.
These consolidation patterns form when there is a tug of war between the buyers and the sellers and the crude oil market can't decide which way to move.
Consolidation Oil Trading Chart Pattern
However, this pattern cannot go on forever and just like in a tug of war one side eventually wins, looking at the oil chart below see how the consolidation eventually had a breakout and moved in one direction. Now how do we as oil traders make sure that we are on the winning side?
Breakout Downwards Sell Oil Signal after a Consolidation
Break-Out Upwards Buy Oil Signal after a Consolidation
Now back to our question, how do we make sure we are on the side that is winning?
Well we wait until crude oil price moves past one of the lines and put buy or sell orders in that direction. After consolidating, If crude oil price breaks-out the upper line we buy, if it breaks out the lower line we sell.
Alternatively if you don't want to wait out the consolidation, you can use pending oil orders. If you would like to know more about pending oil orders go to the topic: Stop Entry Oil Trading Order Types
The two types of stop order types used to trade consolidation crude oil trading patterns are:
- Buy Entry Stop An order to buy at a level above crude oil market oil price.
- Sell Entry Stop An order to sell at a level below crude oil market oil price.
These are oil orders to buy above the crude oil market or to sell below the oil market.
Rectangle Oil Trading Pattern
A rectangle consolidation pattern is a trading range with narrow crude oil price action that forms a consolidation phase in crude oil market. The trading range is defined by two parallel oil trend lines which are horizontal & indicate and show the presence of support & resistance. This oil trading pattern is drawn on a crude oil chart trading using a rectangle, therefore the name rectangle crude oil trading chart pattern.
For this consolidation crude oil chart pattern, crude oil price forms multiple highs and lows that can be connected with horizontal oil trend lines which are parallel to each other. This oil trading pattern forms over an extended period of time giving the pattern its rectangle shape.
A breakout of crude oil price action from this consolidation pattern occurs when either of the horizontal line is penetrated & the trading range of this rectangle is broken. An upside breakout is a buy oil signal. A downside breakout is a sell oil signal.
Rectangle Pattern Crude Oil Trading - Consolidation Pattern
Oil Trading Price Breaks the consolidation range after sometime & continues to move upward after an upward market breakout.
