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WTI Crude Oil Price Forecast: A Technical Tipping Point

WTI Crude Oil Price Forecast: A Technical Tipping Point

2016-03-07 21:54:00
Tyler Yell, CMT, Currency Strategist
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Talking Points:

The price of WTI Crude Oil has moved close to the opening range high of 2016 at $38.36. Looking at the global counterpart to WTI Crude Oil of ICE Brent Crude, it is up ~10% on the year after hitting 12+ year lows in early February. Now, on the back of weakening US Dollar, the metals, and energy markets are overwhelmingly in the positive for the year with Gold up nearly 20%.

Amazingly, the move higher in US Oil from 26.03 on February 11 is now within a whisper of the January 4 Opening Range high of $38.36 in less than a month’s worth of trading days. However, as you can see on the chart, this move may be the toughest yet for the Bullsto push through. Another component of the recent rally that many in the mainstreamare likely not aware of is the positioning change that is aligning with equities. Recently, there has been a new wave of speculative longs come into the market that has recently been absent that could extend this move higher still. The commitment of traders reports recently showed bullish positioning in ICE Brent Crude as the dominant new position being taken.

WTI Crude Oil Bull Rushes Into the 2016 Opening Range High of $38.36/bbl

WTI Crude Oil Price Forecast: A Technical Tipping Point

Key Oil Price Levels from Here

Given the strength of the recent move from the February 11 low, we now look to recent resistance points now acting as new potential support. The late January high of 34.79 and 38.2% of the October-January range at 35.53 will be a good pivotal support from here.

The obvious resistance point to watch sits at the Opening Range high of $38.36. Beyond this heavy zone to break is a combination of the 61.8% retracement of the same range and a prior corrective zone on the way down that tends to be a valuable resistance point on the way up.

Contrarian System Warns of Further Price Support

In addition to the technical focus around the opening range high resistance of $38.36, we should keep an eye on Bears having their stops taken out of the market pushing the price of Oil higher. A move into new highs aligns with our Speculative Sentiment Index or SSI.

Our internal readings of Oil are showing an SSI reading of-1.4686. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders have moved from net long to now net short provides a contrarian signal that US Oil may continue eventually higher through resistance. If the reading were to turn positive yet again, and the price broke back below $32/30, we could begin looking for a retest of the YTD low of $26.03. Until then, higher looks to be the path of least resistance.

T.Y.

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