Two months ago, crude oil's 2-month rolling return was -40% at (1) above. At that time, crude had declined nearly $70 in the prior 9 months, trading near $45. It was easy to find people predicting that crude was nowhere near its low, which some put closer to the $20 range.
On March 31, the Power of Pattern shared the chart below at See It Market, reflecting that only 8-times in history had crude oil created a 10% reversal pattern after a 40% decline in 12 months. And, the average gain 12-months out was 50%.
At the time, crude made the monthly reversal pattern (bullish 10% wick) and was trading at long-term support, which provided a good place for a rally to take place.
The top chart reflects that crude oil in the past 2 months has gained 41%, which is the 7th largest 2-month rally in its history. Think about this…the average gain for crude oil after creating the bullish reversal pattern was 50% in the following 12 months. In the past 2 months, crude has gained 41%, which is 80% of the normal one year gains!
Bottom Line: Bullish reversal wicks at support can provide good entry points and surprise the majority of investors. Crude oil traders now might want to be a little more cautious since the rally over the past two months has been historically large!