Linear Regression Oil Technical Analysis and Linear Regression Trading Signals

Another name for a regression line is a line of the best fit/best fit line. This technical indicator plots the oil trend of the crude oil price over a specified duration of time. The market oil trend is determined by calculating a Linear Regression Oil Trading Trend Line using the "least squares fit" method. This method helps to minimize the distance between the crude oil price data points and the line of best fit.

Unlike the straight Regression Trend-Line technical indicator, the technical indicator draws the end values of multiple Linear Regression trend lines. Any single point along the Linear Regression will be equivalent to the end value of a Regression Trend-line, but resulting oil trendline looks like the Moving Average.

But unlike the Moving Average, this indicator does not show as much delay since it is fitting a line onto data points rather than averaging them.

The Linear Regression is a prediction of the tomorrow's crude oil price drawn today, one day before. When the oil prices are steadily higher or lower than the forecast oil price, then a trader can expect them to quickly return to more realistic fore-casted levels.

In other terms, this indicator shows where the chart oil prices "should" be trading based on a statistical basis and any disproportionate deviation from the regression line is likely to be short-lived.

Crude Oil Technical Analysis & How to Generate Trading Signals

This technical indicator allows for crude oil price selection, adjusting number of periods and smoothing of crude oil price data before applying the calculation and the selection of smoothing type.

This technical technical indicator looks like a moving average but it has a bi-color representation.

• Bullish Signal (Blue color) - A rising line (greater than its previous value 1 previous bar before) is displayed in the up oil trend blue color, while
• Bearish Signal (Red color) - a declining line (lower than its previous value 1 previous bar before) is displayed in the down oil trend red color.

Technical Analysis in Crude Oil Trading