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Oil Price Outlook: Crude Plummets to Six Week Low– WTI Trade Levels

Oil prices posted the largest daily range since December 26th (2018 low) on Thursday but despite the decline, prices are poised to close just 1.26% lower on the week after rebounding off confluence support. These are the updated targets and invalidation levels that matter on the oil weekly price chart(WTI) heading into the August open. Review my latestWeekly Strategy Webinar for an in-depth breakdown of this US Dollar trade setup and more.

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Oil Price Chart – WTI Weekly

Oil Price Chart Weekly

Notes:In my last Oil Price Weekly Outlook we noted that crude had, “failed to mark a daily close above this threshold (60.06/45) and the attempted breach above the monthly opening-range leaves the immediate rally vulnerable while below this key zone.” Oil plummeted a staggering 12% off this mark in the following days with price failing tis week at confluence support near the 61.8% retracement of the June advance at 54.53. Note that weekly momentum has continued to consolidate between 40-60 – look to the break for further guidance.

A break / close below the 38.2% parallel is needed to mark resumption targeting 51.60 backed by more significant support at the January reversal close at 48.24- look for a bigger reaction there IF reached. Key resistance for oil remains at the 60.06/47 backed by the pitchfork resistance – a break / close above this slope would be shift the broader focus higher in crude oil prices.

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

Bottom line:Oil prices turned from key resistance last month and the decline is now testing the first major support hurdle at 54.53. The short-bias may be vulnerable a for a near-term recovery while above this threshold with the broader risk weighted to the downside while within this formation. Stay nimble heading into the August open- I’ll publish an updated Crude Oil Price Outlook once we get further clarity in near-term price action.

Crude Oil Trader Sentiment

Crue Oil Trader Sentiment Chart
  • A summary of IG Client Sentiment shows traders are net-long USD/JPY - the ratio stands at +1.28 (56.1% of traders are long) – bearish reading
  • Traders have remained net-long since May 3rd; price has moved 3.0% lower since then
  • Long positions are 2.4% lower than yesterday and 12.8% lower from last week
  • Short positions are 9.7% higher than yesterday and 11.3% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall. Yet traders are less net-long than yesterday & compared with last week and the recent changes in sentiment warn that the current USD/JPY 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!

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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