Crude Oil Price Outlook: WTI Catches Support At $50- Can It Hold?

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 has plummeted a staggering 33% from the yearly highs registered just last month with prices poised to snap a seven-week losing streak after rebounding from nearby confluence support. Here are the key targets & invalidation levels that matter on the Crude Oil (WTI) weekly chart heading into the close of the month.

CRUDE OIL WEEKLY PRICE CHART (WTI)

(Click on image to enlarge)

Notes: Earlier this month our ‘bottom line’ highlighted that crude oil prices were, “approaching the first major support confluence at 57.45-58.10”. We noted that a break below this zone would risk, “accelerated losses in crude prices with such a scenario targeting the 55-handle backed by the 200-week moving average around ~52.25”.

Crude broke lower days later with price closing below the 200-week moving average last week. Initial support rests at 50.25 where the 50-line of the descending pitchfork extending off the early highs converges on the 76.4% retracement of the 2017 advance. It’s worth noting that typically I’m not a fan of these steep slopes but given the recent price action, we’ll take what we can get.

Initial resistance now stands back at the 200-week moving average (currently ~52.20) with a breach above 55.21 needed to alleviate further downside pressure. Broader bearish invalidation rests with the yearly open at 60.06. A downside break from here keeps the focus on more significant support zone at the median-line of the 2015/2016 slope / 61.8% retracement at 45.45-46.24.

Bottom line: Crude prices could see some back & fill here but the risk remains lower sub-55.21. Note that momentum is still in oversold territory and from a trading standpoint there is nothing to do on the long side just yet. Ideal scenario sees a washout towards 46 before mounting a more meaningful recovery. I’ll publish an updated scalp report once we get further clarity on near-term price action.

CRUDE OIL TRADER SENTIMENT

• A summary of IG Client Sentiment shows traders are net-long Crude Oil - the ratio stands at +5.39 (84.4% of traders are long) – bearish reading
• Traders have remained net-long since October 11th; price has moved 31.0% lower since then
• Long positions are10.2% lower than yesterday and 12.9% higher from last week
• Short positions are 5.6% higher than yesterday and 26.0% higher from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Crude prices may continue to fall. Yet traders are less net-long than yesterday & compared with last week and the recent changes in sentiment warn that the current Oil - the US Crude price trend may soon reverse higher despite the fact traders remain net-long.