CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Oil’s technical overview gets volatile following price plummet

Both retail and CoT remain majority buy, the latter in extreme long territory.

Oil WTI Technical analysis, overview, strategies, and levels

A technical overview shift on the daily time frame to volatile, coinciding with the overview on the weekly time frame that had been showing signs of a breakout. Prior, the overview on the daily had been more consolidatory on expectations that we'd experience more rangebound days than volatile ones (and that has been the case over the past week or so), though once volatility hits and it tends to offer more sessions of it with prices going past key levels, contrarian reversals ideally initiated only after a significant move to avoid an initial stop out.

In terms of key technical indicators, we had a negative DMI (Directional Movement Index) cross occurring by one calculation (though not all given pricing differences), prices at the lower end of the bands, moving further from a key long-term moving average, and with an ADX (Average Directional Movement Index) reading moving closer to trending territory.

On the fundamental front it’s become more interesting, with a will-they-won't-they moment for releasing reserves to reduce Oil - US Crude prices that according to unconfirmed reports includes the US, China (its state reserve bureau saying they "are carrying out work of releasing crude reserves"), Japan and India; US President Biden asking the FTC (Federal Trade Commission) to see whether oil and gas companies are engaging in anti-consumer behavior in hopes of taking domestic gasoline prices lower. As for inventory data out of EIA (Energy Information Administration), there was a surprise drawdown of 2.1 million opposite expectations of a 1 million barrel surplus, gasoline down by 700,000 and a draw for distillate as well by 800,000.

Learn more about oil trading.

IG client* and CoT** sentiment for Oil WTI

When it comes to sentiment, retail trader bias has gone from a slight buy 54% yesterday prior to the plummet to long 60% as some shorts get enticed into closing out while some initiated buys at the short-term support level visible on the daily chart.

For CoT (Commitment of Traders) speculators in its latest report, they remain on hold and in extreme buy territory at 81%.

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.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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