Talking Points:
- Crude Oil Technical Strategy: price below support turns focus on history of 200-DMA bounce
- Crude Oil Still above the Trendline
- Crude Oil Sentiment Available at DailyFX+
- Crude volatility rises on Positioning Shift And Sentiment May Pressure Oil As Supply Swells
CRUDE OIL TECHNICAL ANALYSIS – Crude Oil showed volatility on Tuesday afternoon ahead of the DoE data when the API weekly print showed Crude Inventories rose 4.53M BBl last week, which further adds to the fear that oversupply is back in the Crude market despite OPEC’s efforts. The Technical focus has solely been on the 200-DMA, which has historically been a key divisor of the market between Bullish and Bearishness. The 200-DMA currently sits at 48.618/bbl as of Tuesday afternoon and price looks to be pushing lower.
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Chart created using TradingView
One thing that Crude Oil Bulls cannot blame the drop in Oil prices on is the US Dollar. After a dovish hike, the Fed looks set to further frustrate Oil & Dollar Bulls. Now, it appears the focus is on the oversupply from US Shale that could continue to push price lower and possible to the $44/40 zone in the coming weeks if further weakness surfaces.
The price zone in focus if we continue to see price declines is the area encompassing the 38.2-50% retracement of the February-January price range that also houses the November low and the Median Line of Andrew’s Pitchfork drawn off the key pivots in mid-2015 through February. The zone is $44/$40.57. Naturally, a break back above the 200-DMA that aligns with USD-weakness (CL1 to DXY 20-day correlation is -.256) would help turn the focus higher toward the $55/57 zone.
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The price of Crude Oil recently traded below the 200-DMA with RSI(5) registering a bearish extreme. If the price pops higher as it did in April, August, and November of last year, the Bulls may feel as though they have dodged a bullet. However, the Crude Oil market does not have the fundamental support that other commodity sectors like base metals have, which could lead to an eventual breakdown toward the November low of $43.75/42.25.
The increasing oversupply, and lack of buying pressure alongside sentiment seems to favor a further drop in Crude Prices.
H4 USOIL Chart Shows the Price Possibly Set To Breakdown And Push Away From H4 Ichimoku Cloud
Chart created using TradingView
Crude Has Retail Bulls Hopeful Despite Aggressive Decline Below 200-DMA
Retail trader data shows 72.9% of traders are net-long with the ratio of traders long to short at 2.69 to 1. In fact, traders have remained net-long since Mar 01 when Oil - US Crude traded near 5424.1; price has moved 10.6% lower since then. The number of traders net-long is 4.7% lower than yesterday and 4.6% lower from last week, while the number of traders net-short is 0.4% lower than yesterday and 14.2% lower 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.
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Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com
Key LevelsOver the Next 48-hrs of Trading as ofWednesday, March 15, 2017
For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours of trading.
Contact and follow Tyler on Twitter: @ForexYell
