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Crude Oil Price Outlook: WTI Catches Support at $50- Can It Hold?

Crude Oil Price Outlook: WTI Catches Support at $50- Can It Hold?

2018-11-28 16:30:00
Michael Boutros, Technical Strategist
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In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. Crude oil has plummeted a staggering 33% from the yearly highs registered just last month with prices poised to snap a seven-week losing streak after rebounding from nearby confluence support. Here are the key targets & invalidation levels that matter on the Crude Oil (WTI)weekly chart heading into the close of the month. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

New to Oil Trading? Get started with this Free How to Trade Crude Oil Beginners Guide

Crude Oil Weekly Price Chart (WTI)

Crude Oil Price Chart - WTI - Weekly

Notes: Earlier this month our ‘bottom line’ highlighted that crude oil prices were, “approaching the first major support confluence at 57.45-58.10.” We noted that a break below this zone would risk, “accelerated losses in crude prices with such a scenario targeting the 55-handle backed by the 200-week moving average around ~52.25

Crude broke lower days later with price closing below the 200-week moving average last week. Initial support rests at 50.25 where the 50-line of the descending pitchfork extending off the early highs converges on the 76.4% retracement of the 2017 advance. It’s worth noting that typically I’m not a fan of these steep slopes but given the recent price action, we’ll take what we can get.

Initial resistance now stands back at the 200-week moving average (currently ~52.20) with a breach above 55.21 needed to alleviate further downside pressure. Broader bearish invalidation rests with the yearly open at 60.06. A downside break from here keeps the focus on more significant support zone at the median-line of the 2015/2016 slope / 61.8% retracement at 45.45-46.24.

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

Bottom line: Crude prices could see some back & fill here but the risk remains lower sub-55.21. Note that momentum is still in oversold territory and from a trading standpoint there is nothing to do on the long-side just yet. Ideal scenario sees a washout towards 46 before mounting a more meaningful recovery. I’ll publish an updated scalp report once we get further clarity on near-term price action.

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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 +5.39 (84.4% of traders are long) – bearish reading
  • Traders have remained net-long since October 11th; price has moved 31.0% lower since then
  • Long positions are10.2% lower than yesterday and 12.9% higher from last week
  • Short positions are 5.6% higher than yesterday and 26.0% higher 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. Yet traders are less net-long than yesterday & compared with last week andthe recent changes in sentiment warn that the current Oil - US Crude price trend may soon reverse higher despite the fact traders remain net-long.

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

Previous Weekly Technical Charts

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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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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