Oil Price Outlook: Crude Decline Testing Critical Trend Support

Crude Oil Prices are down 1.1% this week after posting an outside-weekly reversal off key resistance into the close of April. The decline is now testing multi-month trend support and we’re looking for a reaction in off these levels. These are the updated targets and invalidation levels that matter on the Crude Oil (WTI) charts heading into next week.

CRUDE OIL DAILY PRICE CHART

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Technical Outlook: In my latest Oil Price Outlook we noted that “Failure to close a weekly candle above this critical resistance zone (64.40) leaves the long-bias vulnerable near-term.” Oil prices plummeted more than 8.4% from that high before rebounding just pips from confluence support today at the 23.6% retracement of the December advance / February trendline at 60.88. Note that the 2018 open rests just lower at 60.06- a break/close below this threshold is needed to suggest a more significant high is place.

Confluence resistance stands at 63.43/68- a region defined the May open, the June low and the 61.8% retracement of the 2018 range. Ultimately a breach/close above 66.06 is needed to mark resumption of the broader uptrend.

CRUDE OIL 240MIN PRICE CHART

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Notes: A closer look at price action shows oil trading within the confines of a near-term descending channel off the April highs with break below the objective weekly opening-range taking price into the lower parallel today. Initial resistance is back at 62.45 backed by the weekly open / 38.2% retracement at 62.90-63.09- look for a reaction there IF reached with a breach above 63.68 needed to validate a larger reversal. Key near-term support rests at the 100% ext / 200-day moving average / 23.6% retracement at 60.45/60.88with a break below 60.06 needed to suggest a larger correction is underway.

Bottom line: Crude prices are testing confluence support and leaves the immediate short-bias at risk while above this range neat-term. From a trading standpoint, look for possible price exhaustion ahead of 63.68 IF oil prices are indeed moving lower. Ultimately, I’d be interested in fading weakness into a fresh low closer the 60. Review my Top 2019 Trading Opportunities for a look at the longer-term Crude Oil outlook.

CRUDE OIL TRADER SENTIMENT

• A summary of IG Client Sentiment shows traders are net-long Crude Oil- the ratio stands at +1.05 (51.1% of traders are long) – neutral reading
• Long positions are11.1% higher than yesterday and 16.7% higher from last week
• Short positions are21.9% lower than yesterday and 6.5% higher from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil - US Crude-bearish contrarian trading bias.