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Crude oil prices have plummeted nearly 14% off the July highs with the decline now approaching broader up-trend support. Here are the updated targets and invalidation levels that matter on the Crude Oil charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

Crude Oil Daily Price Chart (WTI)

Crude Oil Daily Price Chart

Technical Outlook: In last week’s Technical Perspective on Crude Oil we noted that price had, “broken below parallel support with downside weekly support targets unchanged at 66 and the June close-low / pitchfork support at 64.27.” Crude is breaking to fresh monthly lows today with price approaching areas of near-term support.

Daily confluence support rests at 64.55/66 where the 61.8% retracement of the yearly range converges on the 200-day moving average and down-slope support. Broader structural support rests at the lower parallel (blue) / June lows at 63.57- We’re looking for a reaction / possible exhaustion off one of these levels.

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Crude Oil 240min Price Chart (WTI)

Crude Oil 240min Price Chart

Notes: A closer look at crude price action further highlights the upcoming confluence support targets. Initial resistance stands at 67.14 with bearish invalidation now lowered to 68.34. Ultimately a break below 62.19/56 would be needed to suggest a more significant long-term high is in place with such a scenario targeting confluence Fibonacci support at 59.94-60.06.

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Bottom line: The immediate threat remains lower but we’re looking for a reaction at upcoming support targets. From a trading standpoint, look to reduce short exposure into these targets – IF the broader up-trend in crude is going to hold, price will need to find support at these levels and we’ll be on the lookout for possible exhaustion / long-entries. That said, we’ll respect a downside break / daily close below.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Crude Oil Trader Sentiment

Crude Oil Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long Crude Oil - the ratio stands at +2.49 (71.3% of traders are long) – bearish reading
  • Traders have remained net-long since July 11th; price has moved 9.7% lower since then
  • Long positions are3.1% lower than yesterday and 5.6% higher from last week
  • Short positions are 1.1% lower than yesterday and 17.0% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests crude prices may continue to fall. Traders are less net-long than yesterday but more net-long from last week. The combination of current positioning and recent changes gives us a further mixed Crude Oil trading bias from a sentiment standpoint.

See how shifts in Crude Oil retail positioning are impacting trend- Learn more about sentiment!

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com