Crude oil and candlestick patterns

Candlestick Pattern Squeeze Trading System

Was Crude Oil Propelled by Japanese Candlesticks?

As short as a decade ago, proven oil prices were trading at roughly $13 a barrel. Since that time, prices have almost reached $150 a barrel. Had an individual purchased a futures contract at $15 a barrel and increased his position,

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conservatively, by one contract every time the price of oil increased $10 a barrel, liquidating his investment when prices hit $130, he would have accumulated $815,000 in accumulated profits. Had that individual properly used candlestick patterns during this period, the accumulated profits would have been a multiple several times greater.

The last decade analyzed by candlesticks

Throughout this 10-year period of a bull market in oil, one can clearly identify candlestick pattern formations which showed optimum points for entry into the market, as well as correctional periods. These patterns would have not only have allowed traders to profit from this incredible decade-long bull market, but they would have also been able to recognize correction periods, thereby allowing maximum profits.

Looking at the oil patterns

Innumerable bearish and bullish candlestick formation signals can be found throughout the last 10 years in the oil trading market. One such example can be pointed out on March 31 of 2008, when oil closed down at a relative low of approximately $100 a barrel. The candlestick on that day produced a large black body, signifying that trading ended below the opening price. This short-term downtrend continued with a close below $100 a barrel on the following trading session. The trading range, however, on that day was far narrower. On April 2nd, there was a significant upward movement in price resulting in a far higher closing for oil prices.

These types of price movements, as represented on a candlestick chart, form of a pattern easily recognizable as the formation of a Morning Star. Anyone familiar with candlestick patterns knows that this type of formation acts as a signal towards a sharp appreciation in prices. An astute investor at this time would have purchased a futures crude oil contract, knowing that the likelihood of further price increases was extremely strong. That person would have been correct, and in two weeks, he or she would have accumulated a profit in excess of $15,000.

Profitable patterns on a short timeline

More dramatic results are even possible in a shorter period of time through the proper use and recognition of candlestick pattern formations. In mid-July of 2008, oil prices peaked at around $147 a barrel. The date this occurred a Hangman candlestick pattern is clearly evident. This formation is a bearish signal. An aggressive trader would have sold on that day and see prices fall to below $130 a barrel within three days. A more conservative trader would have waited for the Doji confirmation, which occurred one day after the Hangman appeared. But even that conservative investor would have made $15,000 versus the aggressive trader's $17,000.

One can look over the last 10 years of the oil market and show that candlesticks price patterns are incredibly reliable predictors of price changes, whether they are upwards or downwards.

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