Crude Oil Weekly Technical Outlook: Bullish
- Crude oil prices closed at September 2014 high and new 2022 peak
- The commodity appears to be setting itself up to go on the offensive
- This is as retail traders keep selling, warning of further gains next
WTI crude oil prices soared about 5.9 percent this past week, bringing the commodity to close out at a new 2022 peak, as well as the highest close since September 2014. Oil has rallied almost 50 percent since finding a bottom in December, extending the broader uptrend since 2020. Is the commodity setting itself up to resume gains in the week ahead?
Oil finds itself sitting at the ceiling of a rising trendline from March 2021, holding as key resistance – see daily chart below. As such, signs of weakness in the week ahead could hint at the next leg lower of what has been a steady uptrend. A bullish Golden Cross between the 20- and 50-day Simple Moving averages remain in play, offering a bullish bias.
These lines may come into play as key support should prices turn lower. Still, taking out rising resistance may open the door to extending gains. Above sits the 123.6% Fibonacci extension at 97.20 before the 138.2% level comes into place at 101.30. In the event of a turn lower, it may be helpful to examine the 4-hour chart for a better picture of key support levels.
WTI Daily Chart
Chart Created Using TradingView
In the 4-hour setting, WTI has left behind a neutral Doji candlestick pattern. While this may not necessarily hint at a reversal, downside confirmation in the following sessions may increase the likelihood of a broader turn lower. This is as negative RSI divergence shows that upside momentum is fading.
In such an instance, a near-term rising trendline from December may come into play as key support. Under the trendline sits the February 3rd low at 86.74. Taking out the latter may open the door to revisiting the 81.37 – 82.77 support zone before the 200-period SMA comes into focus.
WTI 4-Hour Chart
Chart Created Using TradingView
Crude Oil Sentiment Outlook - Bullish
The IG Client Sentiment gauge (IGCS) shows that about 27% of retail traders are net-long crude oil. IGCS can at times function as a contrarian indicator. Since most traders are biased to the downside, this hints prices may keep rising. This is as downside exposure increased by 15.78% and 35.84% compared to yesterday and last week respectively. With that in mind, the combination of overall and recent shifts in positioning are offering a bullish contrarian trading bias.
| Change in | Longs | Shorts | OI |
| Daily | -11% | -1% | -7% |
| Weekly | -34% | 125% | -9% |
*IG Client Sentiment Charts and Positioning Data Used from February 4th Report
--- Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
