April NYMEX crude oil broke below a tight $92.17 to $93.94 six day balance bracket on Friday and is approaching a possible “Firecracker Impact” area.
Back in December, the market slowly climbed each day for several days, leaving six close lows in between $87.04 to $89.12. Due to the possibility of their being stops at each of those close lows, the market could quickly accelerate through that range of close lows.
FIRECRACKER IMPACT
The term “Firecracker Impact” is a term I learned from my mentor, Jim Dalton. When you light the fuse of a pack of firecrackers, the fuse reaches the first firecracker and it pops. The explosion of the first firecracker triggers the explosion of the second firecracker and so on causing a pop, pop, pop sound. If the market reaches the $89.12 reference, it could trigger stops, pushing the market lower to the next $88.73 close low triggering the next set of stops. This process could possibly happen at each of the close lows, lowering the market at a fast pace.
UPSIDE MOVE
If the market builds value above Monday’s morning balance range, it may test the $91.10 to $91.98 gap. If the market gains acceptance above $91.10 it may attempt to fill the gap. It is not unusual for the 1st attempt to fill such a large gap to FAIL on the first attempt through.
