Crude Oil has plummeted from $108 to $64 a barrel in a five month period. One thing we know about vertical lows and vertical highs is that these sort of vertical markets always end with a bang. Wide extreme ranges and a massive spike in volume almost always mark capitulation lows.
The large volume is a sign that the sellers have basically given up in the end and the buyers finally step in after a massive decline and take a position of strength at the lows. The other ingredient is wide ranges, the high and low for the dad measure the daily range. A capitulation will almost always end up being at the largest or very near the extreme range of this instrument.
In Crude Oil's case, after 5 months of declining it recently had a 4% decline session, followed by a larger decline of 6% and then another 10% down the following day. The extreme moves are an indication of a capitualtion low coming. Last night it finally bounced and had a low of 63.80 and finished above 69.00 experiencing one of its largest ranges, basically a 10% range for a single session. Unless we experience a larger range in the coming days this is usually a strong sign that the low is in. This could be good news for Oil stocks trading ion the ASX like WPL, STO and OSH as recoveries can often be sharp.
