Oil price gains cause a technical overview shift

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Oil WTI technical analysis, overview, strategies, and levels

Oil - US Crude prices took much of the attention yesterday, prices breaching its previous first resistance level with conformist reversals failing and contrarian breakouts outperforming, breaching the upper end of the band and confirming the positive DMI (Directional Movement Index) cross (of the DI+ above the DI-). From a technical standpoint its overview is a tricky one, a large price gain followed by oscillations have meant that narrowed technicals were in for a break and putting positive bias into the overview would mean buying without waiting for a reversal on conformist strategies, that would be more prone to a stop out in the event if volatility persists.

There's also a question of momentum beyond key levels occurring in a consistent manner, a tougher task for most products.

Furthermore, higher oil prices translating into higher gasoline prices in the US usually draws negative comments and a push for an increase in supply.

As a result, while gains beyond key levels can still occur, the overview is more ‘consolidation – volatile’ with volatility intraday potentially averaging back intraday (or even intraweek should offline US production due to the hurricanes persist for a longer period than expected).

Conformist breakout strategies might be limiting in profit and not offer long-term results that can stick, while reversals ought to be initiated only after a serious break/breach occurs first, on the way back should prices retrace.

On the fundamental front, we had a drawdown that was larger than expected out of the Energy Information Administration to be 6.42 million barrels for US crude oil inventories, distillate dropping 1.7 million barrels while gasoline was below estimates this time around though still in deficit at -1.85 million.

US retail data is on offer tonight with more manufacturing, while tomorrow we get UoM’s preliminary consumer sentiment reading and rig data out of Baker Hughes.

Learn more about oil trading.

IG client* and CoT** sentiment for Oil WTI

In sentiment, we’ve got ourselves a shift amongst retail traders from the middle to majority sell 57% as longs get enticed into closing out (while short bias might rise further as they initiate closer to the mid-term resistance level around $74).

Commitment of Traders speculators remain heavy buy according to last Friday’s report at 76%.

Oil WTI chart with retail and institutional sentiment

^{*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the previous trading day.}

^{**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.}