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Oil Price Outlook: Crude Recovery Vulnerable below Trend Resistance

Oil Price Outlook: Crude Recovery Vulnerable below Trend Resistance

2020-09-19 04:00:00
Michael Boutros, Strategist
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Crude Oil Technical Forecast: WTI Weekly Trade Levels

  • Crude Oilupdated technical trade levels – Weekly Chart
  • WTI ranges below long-term downtrend resistance– risk for further losses while below 43
  • New to Oil Trading? Get started with this Free How to Trade Oil-Beginners Guide

Oil prices are poised to snap a two-week losing streak after stalling at a key resistance range for nearly seven-weeks. The recovery keeps price below this critical threshold and leaves the rally vulnerable while below long-term downtrend resistance. These are the updated targets and invalidation levels that matter on the oil price weekly chart. Review my latest 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

Oil price chart

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

Notes:Crude oil is trading within the confines of a descending pitchfork formation extending off the 2018 / 2020 highs with price trading just below the upper parallel. The April rally failed at a critical resistance zone into the close of August trade at 42.02/43.08- a region defined by the 2017 low / low-week close. Note that the upper parallel converges on this range in the weeks ahead and further highlights the technical significance of this key resistance zone with the multi-month rally at risk while into this threshold.

Initial weekly support rests with the late-May channel line (currently ~37) with a break below risking a larger correction towards subsequent objectives at the 23.6% retracement of the April rally at 33.42 and the 2016 low-week close at 29.07- an area of interest for possible downside IF reached. Ultimately, a breach / close above the 61.8% Fibonacci retracement of the 2018 decline at 47.51 is needed to validate a larger breakout / trend reversal is underway.

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Bottom line:Oil prices remain vulnerable while below critical resistance at 42.02/43.08. From a trading standpoint, be on the lookout for possible topside exhaustion ahead of this zone with a break below channel support needed to shift the medium-term focus lower. Ultimately, a larger correction may offer more favorable opportunities with a topside breach above 47.51 needed to keep the April rally viable.

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 – WTI Price Chart

Oil Price Sentiment Chart
  • A summary of IG Client Sentiment shows traders are net-long crude oil - the ratio stands at +1.26 (55.79% of traders are long) – weak bearish reading
  • Long positions are 10.77% lower than yesterday and 29.54% lower from last week
  • Short positions are5.23% higher than yesterday and 34.56% higher 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. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Oil - US Crude price trend may soon reverse higher despite the fact traders remain net-long.
Oil - US Crude BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 21% -16% 2%
Weekly 3% -6% -1%
Learn how shifts in Oil retail positioning impact trend
Get My Guide

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Previous Weekly Technical Charts

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--- Written by Michael Boutros, Technical 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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