Oil Trading Trend Line Break

After crude oil price has moved in a certain direction for an extended period of time within a trading channel it reaches to a point where it stops moving within this trading channel. When this happens we say that the oil trend line has been broken.

Since the line is point of support or resistance then we expect the crude oil market to move towards the opposite direction. When this happens traders will close the oil orders which they had bought or sold. This is referred to as taking profit.

Up oil trend Reversal

When crude oil price breaks-out upward line (support) the crude oil market will then move down

This signal is considered to be complete with the creation of lower high or a lower low. This also provides a trading opportunity to go short once it is broken.

Down oil trend Reversal

When crude oil price breaks-out downwards line (resistance) the crude oil market will then move up

Downwards Channel break

This trading signal is considered to be complete with creation of a higher low or higher high. This also provides a trading opportunity to go long once it is broken.

NB: Sometimes when crude oil price breaks its oil trend it might first of all consolidate before moving in the opposite direction. Either way it is always good to take profit when the crude oil market direction reverses.

To trade this crude oil trading setup as a trader once you open a new trade in the direction of the oil trend reversal the crude oil price should immediately move in that direction, in a oil price break-out manner. This means that the crude oil market should immediately move in that direction without much of a resistance.

If on the other hand the crude oil market does not immediately move in the direction of the crude oil price breakout then it is best to close out the trade because it means that the oil trend is still holding.

Another tip is to wait for the oil trend line to be broken & for the crude oil market to close above or below it so as to confirm this oil trade signal.

What happens is that most traders open trades waiting for a reversal even before the oil trend is broken, only for the crude oil price to touch this line and for the current market direction to hold and oil to continue with the current market direction.

Therefore, when trading this crude oil trading setup it is best to wait until the breakout has been confirmed by crude oil price closing above or below the oil trendline, depending on the direction of the market.

• Upwards Market Direction Reversal - this oil signal is confirmed once the crude oil market closes below this upward line, this should be the correct time to open a sell short trade, so as to avoid a oil trading whipsaw.

• Downwards Market Direction Reversal - this oil signal is confirmed once the crude oil market closes above the downwards line, this should be the correct time to open a buy long trade, so as to avoid a oil trading whipsaw.

Combining With Double Tops or Double Bottoms Oil Trading Chart Patterns

A good trade setup to combine this crude oil trading setup with is the double tops and double bottoms crude oil patterns. Read Double Tops & Double Bottoms Chart patterns Guide.

This setup should already have formed before the oil trend break signal. Because these double tops and double bottoms are also reversal crude oil signals, then combining these two setups will give the trader a good probability of avoiding a oil trading whipsaw.

In the above chart screenshots these oil trading setups can be confirmed to have formed even before the reversal oil trade signal appeared.

First Examples of Upward Direction Reversal - the Double tops chart pattern had already formed before the oil trend break trading signal appeared on the crude oil trading chart.

Second Example of Downwards Direction Reversal - the Double bottoms crude oil chart pattern had already formed before the oil trend break trading signal appeared on the crude oil trading chart.

Double Tops or Double Bottom Combined With other Reversal Trading Signals