Multidisciplinary Trading

The first step is using multiple disciplines within trading such as pattern recognition, candlestick recognition, large timeframes and small timeframes, Wyckoff, volume, indicators, Fractals, sentiment (usually taking the opposite side), ratios (eg: Oil/gold ratio).

I also like to include another less used indicator for trading. Real investors approval of the stock/commodity. In this case we would cite Warren Buffet buying Oil/gas stocks.

Additionally, I think it is wise to learn about the underlying asset you are trading to gain whatever possible edge you can from real fundamentals. In this case, A potential lost decade ahead with stagflation is good for commodities.

I suppose what I am trying to stress here is that it is best to keep learning and broadening your toolset. I am a huge fan of Charlie Munger and I know he would hate what I am doing here, but none the less he would atleast have some appreciation for the application of his process.

If a bunch of these things listed above are pointing toward a move, then you get what Charlie would call a lollapalooza effect.

Analysis:

Looking at the daily chart for Crude Oil, we appear to be seeing a very compelling confluence of bullish technical signals that suggest a potential significant reversal to the upside.

Textbook Falling Wedge Formation:

Price action is clearly consolidating within a well-defined falling wedge pattern.
We have observed multiple clear touches (3+ on the upper, 4+ on the lower trendline), indicating these boundaries are highly respected by the market.
Crucially, volume has been declining as price consolidates within the wedge, a classic characteristic signifying diminishing selling pressure.
The angles of convergence also appear ideal, with the upper trendline being steeper than the lower.
Wyckoff Accumulation Schematic #1 in Play?

Diving deeper, the internal structure of this falling wedge strongly resembles Wyckoff’s Accumulation Schematic #1.
We can identify potential phases:
PS (Preliminary Support): Early signs of buying.
SC (Selling Climax): A sharp sell-off often with high volume, marking potential capitulation.
AR (Automatic Rally): The first significant bounce after the SC.
ST (Secondary Test): Retesting the lows of the SC.
Spring: A key event where price dips below the established trading range support (or the wedge’s lower trendline) only to quickly reverse back above it, effectively trapping sellers and confirming a shakeout of weak hands.
This internal Wyckoff structure within the falling wedge significantly strengthens the case for institutional accumulation taking place.
Bullish Candlestick & Oscillator Confluence:

At the recent lows, we observed a potential Piercing Line bullish reversal candlestick pattern forming right at the lower trendline of the wedge. This indicates aggressive buying stepping in. Furthermore, there appears to be a bullish divergence on the MACD – as price made lower lows within the wedge, the MACD indicator made higher lows (or showed increasing bullish momentum), suggesting underlying bearish momentum is weakening significantly.
Market Sentiment & Potential Implications:

It’s noteworthy that this bullish technical setup is occurring amidst increased bearish media and Twitter sentiment surrounding oil. From a contrarian perspective, extreme bearish sentiment often coincides with market bottoms, as “smart money” accumulates positions while the crowd is most pessimistic. This situation could set the stage for a strong reversal, potentially fueled by short covering.

Conclusion:

All signs from price action, volume, candlestick patterns, and oscillators point towards a high probability of a bullish reversal and an upside breakout from this well-formed falling wedge. The potential Wyckoff accumulation pattern adds significant weight to the idea that sophisticated players are positioning for a significant move higher.

What to Watch For:

The next critical step is a decisive breakout above the upper trendline of the falling wedge, ideally accompanied by a significant surge in buying volume. This would confirm the pattern’s completion and signal the potential start of a new uptrend. A more aggressive approach is entering now and capturing more upside if it is to occur.