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Talking Points:
- Crude Oil Technical Strategy: Waiting to Sell On Strength
- 61.8% Fibonacci Support On WTI / Crude Oil Failed Early Thursday
- DoE Inventory Build Has Crude Oil Lower for 7th Day
Another day, another large imbalance in the Supply-Demand picture in WTI Crude Oil. The rout in Oil has extended to 7 straight days, the longest such strength since July 2014. Today, the DoE inventory came in way past expectations for a build of 790k bbl to 4.2m bbl. This inventory build is another discouragement for a market that is trying to figure out if the demand will pick up relative to supply when supply continues to overwhelm the market. What’s important to note is that this is happening with short-term weakness in the US Dollar. Should the US Dollar pick up steam, which Technical Analysis currently favors, then the August 24th lows could come into view very soon. This move lower in Oil is having its usual widespread effect of dragging down the Canadian Dollar and Norway’s Krone.
We recently mentioned two key levels very close to each other that stood out on the crude oil price chart. Both levels, the 61.8% Fibonacci Support on WTI / Crude Oil of the August-October range sits at 42.76 and the low from 2-weeks ago at $42.57 quickly gave way. This development followed a break of trendline support from the August low and the mid-October low this week. Price is now sitting on the Weekly S2 support. A move lower from here is rare and consider extended as the Weekly S2 & R2 tend to frame a majority of price action, even in strong trends. Such a move makes a compelling argument for the patient trader to wait and sell on short-term strength to get a favorable risk: reward trade. Currently, we see resistance at the recent higher low of $45.09, which is the weekly opening range high.
If there is a bullish development on Crude, it would be in the extension of the current downside move. 7-8 straight down days are rare. However, extended on the downside isn’t the equivalent to a buy signal, unless you’re day trading. We often point out that there is a common occurrence of USD strength and commodity weakness in markets. Therefore, if little changes in the story of US dollar strength or inventories continue to rise, then the Oil price charts will likely continue to point to lower towards the August 24th low of 37.73. T.Y.
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