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 prices have rallied nearly 10% from the yearly lows with the advance now testing a key technical resistance confluence around the 60-handle. These are the updated targets and invalidation levels that matter on the Crude Oil weekly price chart.

USD/CAD WEEKLY PRICE CHART

(Click on image to enlarge)

Notes: In last month’s Crude Oil Weekly Technical Outlook we noted that price was approaching 2018 pitchfork resistance with, “A topside breach of this formation / the high-day close at 57.14 targets more a more significant resistance confluence at 59.61-60.06 where the 50% retracement of the October decline and the 2018 open converge on the 2015/ 2016 pitchfork resistance- look for a larger reaction there IF reached.” Oil prices are testing this critical resistance confluence today on the back of a weak inventories report that showed a drop of more than 9.59mln barrels last week.

The focus is on a reaction off this threshold with the yearly advance at risk near-term while below. A weekly close above would be needed to suggest that a more meaningful low was registered in December with such a scenario targeting the 52-week moving average at ~62.82 and the 61.8% retracement of the 2018 decline at 63.68. Key support and bullish invalidation now rests back at 55.21/53- weakness beyond this threshold would risk substantial losses for crude prices.

Bottom line: We’re looking for a reaction on this stretch into confluence resistance at 59.61 – 60.06. Watch the weekly close- below would highlight the threat for a near-term correction/exhaustion in price. From a trading standpoint, a good place to reduce long-exposure and raise protective stops. We’ll be looking for possible price exhaustion heading into next week IF crude prices respect this threshold into the close. I’ll publish an updated Crude Oil Technical Outlook once we get further clarity in near-term price action

CRUDE OIL TRADER SENTIMENT

• A summary of IG Client Sentiment shows traders are net-short Crude Oil - the ratio stands at -1.04 (49.1% of traders are long) – neutral reading
• Long positions are 4.2% lower than yesterday and 5.7% lower from last week
• Short positions are 8.2% lower than yesterday and 1.5% higher from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may continue to rise. Yet traders are less net-short than yesterday but more net-short from last week and the combination of current positioning and recent changes gives us a further mixed Oil - US Crude trading bias from a sentiment standpoint.