Hello and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Market Strategist for CMS FX.

Again, welcome to another lesson in technical analysis. As always, these are simply for information and educational purposes only.

We will continue this lesson by taking a look at combining indicators. But also, we want to look at what information can we trade with as an example for this particular lesson.

So have a look at this chart. This is crude oil June contract and it's a daily chart. What is the thing that we can look at that could help us to take trades?

Well, if I take a look at the next chart, the first thing that really stands out is that we had a double top pattern and that's a bearish sign. So whilst crude oil has been trading sideways, we had this double top pattern here and then of course the commodity declined to the downside.

Then of course the market stalled and has since then rallied up. So what information do we have at this point? Well, if we draw a trend line going across from the double tops we can see straight away that recently as we speak, crude oil has broken to the upside. Now that's a bullish sign.

But of course, let's take a look at the RSI indicator which we've looked at in previous lessons. What is that telling us? When we have the double top pattern what was the position of the RSI? It had reached an extreme level. In other words, it considered the market as being overbought and that coincided with the market coming off at 0.1 and 0.2. Right now, as the market has broken above the recent highs, we also have the RSI in the extreme overbought territory, so that's quite bearish as an indicator. But the market itself is quite bullish because it has actually taken out the recent high.

Is it time to buy crude oil? Well let's take a look further. If we take a look at the parabolic SAR which I like as an indicator to indicate trends, what information is that providing? Well again, look into the extreme right hand side. We can see that crude oil has broken above the recent parabolic SAR indicator. That indicated that we were in a bullish mode.

So although the RSI is at an extreme level, the parabolic is telling us that the trend right now, at least for the short-term, should be to the upside. So I don't really want to pay too much attention this telling me to sell crude oil right now. What I'm looking is for further evidence.

On this chart what I've done is to add the 20 period moving average and the traditional MACD. What information does this tell us? Well, straight away, crude oil is now above its 20 period moving average. That's a bullish sign. The MACD is clearly above the zero line and it has also crossed to the upside giving us a buy signal.

So again, we don't want to just jump on board. Now long-term traders might say: 'Well, actually we've taken recent highs out, this is time to buy because it has broken to the upside.' And I would agree with that. But we really do need to look at risks and rewards as we go through. So essentially, we have a possible triple top pattern - that's bearish. We have a channel breakout which is bullish. We have an RSI indicator which is in the overbought territory - that's bearish and we have the parabolic SAR telling us that it's time to buy, so that's bullish as well and of course the MACD is bullish and the moving average is bullish. So the overall consensus is more towards the bullish side.

So what would we do to enter this particular commodity? Well, I would like to see a pullback towards the 20 period moving average if possible because that would offer us a slightly better risk to reward ratio in terms of breaking up towards the upside again. We would also await a bullish flag pattern if that could develop and maintain a positive parabolic SAR and MACD. So we want to see those remain in a positive state.

RSI should ideally be in the lower band area rather than the high position, indicating that the market could potentially be oversold and then of course we might want to even look for inside or outside bar patterns.

So in the next lesson we'll look at more technical indicators and how to apply it to current market positions. In the meantime, have a great trading week. This is Sandy Jadeja for CantosCharts Masterclass.