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In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend.Crude prices have been on a tear for the past few months with prices up more than 20% year-to-date. The advance is now approaching critical long-term resistance levels and may limit the topside near-term. Here are the key targets & invalidation levels that matter on the WTI weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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Crude Oil Weekly Price Chart (WTI)

Crude Oil Price Chart - Weekly (WTI)

Notes: In last month’s Technical Perspective on Crude Oil, we noted that price was approaching a key resistance range into 74.94 with subsequent levels of interest at the 2012 low / 2008 trendline at 77.26and the Fibonacci confluence / pitchfork resistance at80.61/89. Price registered a high at 76.88 last week before pulling back to close below the 2011 low. The levels remain unchanged into the October / 4Q open with our immediate focus on reaction off this key mark.

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

Bottom line:The broader long-bias remains vulnerable heading into this region. From a trading standpoint, a good place to close / reduce long-exposure and raise protective stops. I’ll be on the lookout for possible price exhaustion / short-entries on another attempt higher while below 77.26. Ultimately a breach / close above 80.89 is needed to fuel the next ‘leg’ higher in crude prices. Initial support rests at 71.14backed by 69.17 (area of interest for long-entries IF reached).Keep in mind we’re just now beginning to carve out the October opening range and we’ll be looking for the break to offer further guidance on our medium-term directional bias.

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Crude Oil Trader Sentiment

Crude Oil Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-short Crude Oil - the ratio stands at -1.24 (44.6% of traders are long) – weak bullish reading
  • Traders have remained net-short since September 21st; price has moved 5.2% higher since then
  • The percentage of traders net-long is now its highest since September 27th
  • Long positions are3.8% higher than yesterday and 9.3% lower from last week
  • Short positions are 14.6% lower than yesterday and 20.4% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US Crude Oil prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week and the recent changes in sentiment warn that the current US Crude Oil price trend may soon reverse lower despite the fact traders remain net-short.

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

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Previous Weekly Technical Perspectives

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--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

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