Crude Oil, WTI, Retail Trader Positioning, Technical Analysis – IGCS Commodities Update
- Crude oil price 7-week winning streak coming to an end?
- Retail traders are starting to turn bullish on the commodity
- This is a sign that further losses might be ins tore for oil
Despite Thursday’s push higher, WTI crude oil prices are on course to drop -3.5 percent this week so far. Not only would that be the worst week since early May, but it would also bring a 7-week winning streak to an end. In response, retail traders have started to become more bullish. This can be seen by taking a look at IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, is crude oil at risk of extending recent losses?
Crude Oil Sentiment Outlook - Bearish
According to IGCS, about 47% of retail traders are net-long. Since a slight majority are biased to the downside, this still favors a bullish contrarian trading bias down the road. However, downside exposure has decreased by 9.04% and 18.62% compared to yesterday and last week, respectively. With that in mind, recent changes in positioning hint that the price trend may soon reverse lower despite overall exposure.
| Change in | Longs | Shorts | OI |
| Daily | 8% | -7% | -2% |
| Weekly | 2% | 1% | 1% |
On the daily chart below, WTI crude oil has confirmed a breakout under the near-term rising trendline from June. That is offering a near-term bearish technical bias. But, prices paused just above key support which is the midpoint of the Fibonacci retracement level at 78.66. If this price holds, a turn higher would place the focus back on the 81.44 – 83.48 inflection zone.
Keep in mind that recent losses followed a Bearish Engulfing candlestick pattern, underscoring a near-term downward bias. Still, further losses would place the focus on the 50- and 100-day Moving Averages. A bullish Golden Cross formed between them not long ago, underscoring a broader upside technical bias. As such, it would take further losses to reinforce a stronger bearish conviction.
Crude Oil Daily Chart
-- Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com
