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WTI Crude Oil Price Forecast: $30 Acting Like Strong Price Support

WTI Crude Oil Price Forecast: $30 Acting Like Strong Price Support

Tyler Yell, CMT, Currency Strategist

Interested In our Analyst’s Longer-Term Oil Outlook, be sure to sign up for our free oil guide here.

Talking Points:

  • Crude Oil Technical Strategy: Oil Trying To Find Footing Around $30, Providing ST Upside
  • The Offered US Dollar Further Puts Support Under Oil’s Advance
  • WTI Is Starting To Divorce From Leading Risk Sentiment, Which May Support US Oil Bulls

Have We Found Our Floor?

Oil ended Monday’s trading day right around $30. However, the continued pain in equities is no longer being led by Oil nor is Oil being driven lower by the risk sentiment, which has turned markedly lower as Bank CDS are trading at their highest levels in the last 12 months, and JPY is at 14 months highs.

In the midst of this unfavorable environment, Oil is now looking supported around the $30 level, which could stop the proverbial bleeding in one of the worst hit commodity markets. Unfortunately, the glut of supply remains and will likely remain a cap on prices, however with a potential floor in place at $30, we may have a reason now to focus on where a ceiling of the price might be found.

US Oil Has Found an Intermediate Floor around the January 21 Daily Range

WTI Crude Oil Price Forecast: $30 Acting Like Strong Price Support

Trade Oil with margin requirements as little as $20 USD, learn more HERE (non-US residents only)

Key Levels from Here

For now, the key price resistance is the late January high of 34.79. If the price can close above that level, the focus will turn to the opening range high for 2016 in Oil of $38.36. The larger support is identified as the price range of January 21 at $27.85-30.22 should support price, however, the specific level is the pivot low on January 26 of 29.23.

Bear markets have some of the most aggressive rallies that can put short sellers on the sideline until a new narrative takes over the market or the outlook darkens. The ~26% rally off the January 20 low appears to have taken the appetite for new lows out of the market. However, it’s important to be aware of the potential for a sideways consolidation or price triangle formation that would likely end in a retest of the January 20 lows.

The triangle consolidation pattern mentioned above would keep price trapped between the late January high of 34.79 and the support mentioned above at 29.23 for a few more weeks. Put another way, if price is unable to break above 34.79 the imminent downside threat is removed, but the probability of a new low remains higher over the next month or two.

Sentiment Flip Warns of Further Long-Term Downside

In addition to the technical pressure that Oil may have found a short-term support zone around the January 21 price range, the larger bearish view aligns with our Speculative Sentiment Index or SSI. Our internal readings of Oil are showing an SSI reading of 2.337.We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are now bullish provides a contrarian signal that US Oil may continue eventually lower.If the reading were to turn negative again, and the price broke back above $34.79bbl, we could begin looking for a retest of the YTD high of $38.36.

T.Y.

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