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 rallied every day since the start of the year with price now eyeing initial resistance targets. We’re looking for a reaction off this mark to offer guidance on whether a more significant low was registered last month, or whether this is simply a corrective bounce.

Here are the key targets & invalidation levels that matter on the Crude oil weekly chart into the start of the year.

CRUDE OIL WEEKLY PRICE CHART

(Click on image to enlarge)

Notes: In last month’s Crude Oil Weekly Technical Outlook we noted that a break below confluence support at 45.45, ‘would risk substantial losses for crude with subsequent support objectives eyed at the 2017 low-week close at 43.09 and the highlighted slope confluence near the 40-handle.” Price registered a low at 42.34 into the close of the year before mounting a rally of more than 17% over the past three weeks. So, was that the low?

While it’s still too early to confirm, the technicals do highlight some interesting factors to consider. Last week’s advance marked the single largest one-week rally since mid-June – in that instance, crude rallied for two weeks before falling into a range which held the low for nearly 19-weeks before breaking. While this is just an anecdotal observation, it’s worth noting that weekly RSI is attempting to recover from oversold territory with price poised to mark the longest consecutive daily advance since May (in that instance price peeked nearly two-week later).

Key support remains at 45.04/45 (2018 low-week close / 61.8% retracement) with initial resistance eyed at 50.49. A breach above the median-line would be needed to suggest a more significant near-term low is in place with such a scenario targeting the 200-week moving average at ~52.12 and the confluence resistance zone at 55.21/53.

Bottom line: The immediate focus is on a reaction off resistance confluence just higher around 50.49. From a trading standpoint, the threat remains for a pullback off this mark but IF price has registered a more important low, losses should not surpass 45 on a weekly close basis. Nothing should be attempted on the long-side here until we get another test / failure on a move towards the December lows. Ultimately, a pullback may offer more favorable long-entries while above the monthly / yearly open.

CRUDE OIL TRADER SENTIMENT

• A summary of IG Client Sentiment shows traders are net-long Crude Oil - the ratio stands at +3.2 (76.2% of traders are long) – bearish reading
• Traders have remained net-long since October 11th; price has moved 31.2% lower since then
• Long positions are 0.6% lower than yesterday and 6.5% lower from last week
• Short positions are 19.3% higher than yesterday and 82.0% higher from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil - US 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 - US Crude price trend may soon reverse higher, despite the fact traders remain net-long.