Crude Collapses as WTI Searches for Support

Crude Collapses as WTI Searches for Support


Oil Weekly Price Outlook: Crude Collapses as WTI Searches for Support

Crude prices posted an outside weekly reversal off the monthly highs and risk further losses into the May close. These are the levels that matter on the WTI weekly chart.

In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. Crude Oil is down more than 7% this week with prices down more than 12% from the yearly highs registered in April. The decline marks a break of the May opening range and leaves the risk for further losses. Here are the updated targets and invalidation levels that matter on the Crude Oil (WTI) weekly chart heading into the close of the month. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this setup and more.

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Crude Oil Weekly Price Chart (WTI)

Oil Weekly Price Outlook: Crude Collapses as WTI Searches for Support

Notes:Crude oil prices are poised to mark an outside-weekly reversal off a key resistance range at 63.68–64.40 – a region defined by the 61.8% retracement of the 2018 range, the August swing low and the yearly high-close. The reversal has broken below previously noted support at 59.61-60.06 and leaves the risk weighted to the downside on account of the May opening-range break.

That said, decline was halted late in the week at the 100% extension of the decline near 57.24– could see some back & fill here but the risk remains lower sub-60.06. The next downside support objectives comes in at 55.21/53 where the 38.2% retracement converges on the 2017 opening-range highs. Look for a larger reaction there IF reached.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom line:A break below the monthly range lows / confluence support leaves the risk lower heading into the close of the May trade. From a trading standpoint, look for exhaustion on a near-term rebound while below 60.06– reduce short-exposure on a test of the 55.53/21 support zone – expect a more significant move there. Review my Top 2019 Trading Opportunities for a look at the longer-term Crude Oil outlook.

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Crude Oil Trader Sentiment

Oil Weekly Price Outlook: Crude Collapses as WTI Searches for Support

  • A summary of IG Client Sentiment shows traders are net-long Crude Oil- the ratio stands at +2.66 (72.7% of traders are long) – bearishreading
  • The percentage of traders net-long is now its highest since January 21st
  • Long positions are29.5% higher than yesterday and 77.8% higher from last week
  • Short positions are33.1% lower than yesterday and 50.5% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Crude Oil prices may continue to fall. Traders are further net-long than yesterday & last week, and the combination of current positioning and recent changes gives us a stronger Crude Oil-bearish contrarian trading bias from a sentiment standpoint.

See how shifts in Crude Oil retail positioning are impacting trend- Learn more about sentiment!

Previous Weekly Technical Charts

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— Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex





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