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Crude Oil Price Outlook: Moment of Truth for WTI Rally at Resistance

Crude Oil Price Outlook: Moment of Truth for WTI Rally at Resistance

2020-01-07 16:30:00
Michael Boutros, Strategist
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Crude Oil prices are poised to snap a five-week winning streak with WTI pulling back from a rally of more than 27% off the September lows. The reversal comes at a critical resistance barrier we’ve been tracking for months now and leaves the immediate advance vulnerable into the start of the month. These are the updated targets and invalidation levels that matter on the oil price weekly chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this crude oil price setup and more.

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Crude Oil Price Chart – WTI Weekly

Crude Oil Price Chart - WTI Weekly - CL Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; Crude Oil (WTI) on Tradingview

Notes: In my previous OilWeekly Price Outlook we noted that a breach above the April trendline was needed in WTI to, “keep the long-bias viable targeting 63.60-64.40 – a region defined by the 61.8% retracement of the 2018 decline and the August 2018 swing low (look for a larger reaction there IF reached).” Price registered a high at 64.69 early in the week before reversing and leaves the advance vulnerable near-term while below this threshold.

Initial weekly support rests with the July high-close at 60.31 – note that this level converges on a series of slope-lines into the close of the month and a break / close below would be needed to suggest a larger correction is underway. That said, look for a topside breach to expose subsequent resistance objectives at the 61.8% extension of the late 2018 advance at 65.56 and 68.72.

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

Bottom line: Crude oil prices are testing a major confluence resistance zone at 63.68-64.40 – the immediate long-bias may be vulnerable while below this threshold medium-term. From a trading standpoint, a good region to reduce long-exposure / raise protective stops. Be on the lookout for possible topside exhaustion with a larger pullback to ultimately offer more favorable long-entries closer to uptrend support. Losses should be limited by 60.31 IF prices are indeed heading higher on this stretch. I’ll publish an updated Oil Price Outlook once we get further clarity on the near-term technical trade levels.

Crude Oil Trader Sentiment – WTI Price Chart

Crude Oil Trader Sentiment - WTI Price Chart - CL Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long crude oil - the ratio stands at +1.23 (55.15% of traders are long) – weak bearish reading
  • Long positions are 10.09% higher than yesterday and 98.37% higher from last week
  • Short positions are15.61% lower than yesterday and 30.66% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil - US Crude prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger Crude oil-bearish contrarian trading bias from a sentiment standpoint.
Oil - US Crude MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -10% 8% -4%
Weekly -9% -13% -10%
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Previous Weekly Technical Charts

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

Follow Michael on Twitter @MBForex

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

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