Crude prices have plummeted more than 10% after reversing off key confluence resistance at the monthly highs with the decline now targeting near-term support objectives. Here are the updated targets and invalidation levels that matter for Crude Oil (WTI) heading into the start of the week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
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Crude Oil Daily Price Chart
Technical Outlook:In last week’s Technical Perspective on Crude Oil, we highlighted how that price has extended into a critical weekly resistance confluence at 74.94 with, “the immediate threat lower while below the high-week close at 73.93. From a trading standpoint, I’ll favor fading strength targeting the lower slope lines with the broader outlook still constructive while within this formation.”
The daily chart shows price taking out support targets at 70.41 and 68.03 today- things get a bit dicey down here. The next support targets of interest are eyed at the 2010 low / 100-day moving average at ~67.14 and the sliding parallel (red) extending off the yearly lows, around ~66. Both of these levels have the potential to offer a larger recovery in price IF crude is going to hold this formation. Resistance now stands back at 71.21 with a breach above 72.88 needed to alleviate further downside pressure (bearish invalidation).
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Crude Oil 240min Price Chart
Bottom line: The immediate threat remains lower but we’re looking for possible exhaustion at support nearby support targets. From at trading standpoint I would be looking to reduce short-exposure into these levels and be on the lookout for evidence that an exhaustion low is in place before attempting long-entries. At the end of the day, a break below the lower parallel would exposure a larger decline targeting 64.70 and the 200-day moving average / 2015 highs at 62.56/80.
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- A summary of IG Client Sentiment shows traders are net-long Crude Oil- the ratio stands at +1.4 (58.3% of traders are long) – bearishreading
- The percentage of traders net-long is now its highest since Jun 18
- Long positions are 23.9% higher than yesterday and 54.7% higher from last week
- Short positions are 2.5% higher than yesterday and 36.7% 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. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger Oil – US Crude-bearish contrarian trading bias from a sentiment standpoint.
See how shifts in Crude retail positioning are impacting trend- Learn more about sentiment!
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– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at firstname.lastname@example.org