Trendline Break

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

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

Up trend Reversal

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

This signal is considered to be confirmed with formation of lower high or a lower low. This also provides a trading opportunity to go short once it's broken.

Down trend Reversal

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

Downwards Channel break

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

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

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

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

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

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

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

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

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

Combining With Double Tops or Double Bottoms Oil Trading Chart Setups

A good trade set up to combine this oil setup with is the double tops and double bottoms chart patterns. Read Double Top and Double Bottom Chart patterns Tutorial.

This setup should already have formed before the trend break signal. Because these double tops and double bottoms are also reversal signals, then combining these 2 setups will give the trader a good probability of avoiding a oil whipsaw.

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

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

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

Double Tops or Double Bottoms Combined With other Reversal Trading Signals