Key Takeaways:
- Crude Oil technical strategy: watching for potential to extend to $53.94, 100% Fib extension
- Break above trendline confluence opens upside targets, aligns with sentiment bias
- IGCS Highlight: USOIL sharp increase (42% w/w) in net-short position keeps ST focus higher
Crude Oil bulls are likely breathing a sigh of relief. Without aggressive volume, the price of Crude Oil has surpassed a confluence of resistance that combined the 200-DMA ($49.55/bbl) as well as two trendlines that are drawn off lower-highs from the 2017 downtrend. Now, the key questionare whether or not the downtrend is over?
You can see on the chart below that we’ve produced higher lows in the markets and are working on our first higher high (surpassing the early August high) of 2017. The good news (for Crude Bulls) is that the sentiment picture per IGCS aligns with further strength. There is more information on Crude-specific IG client sentiment below.
The next level of focus will be a daily close above the August high, which would then bring about a target of $51.97 (late-May high) followed by the 100% Fibonacci extension of $53.94. One boon for the higher price of Crude Oil has been the US Dollar (Dollar Index – DXY). The weakness of DXY has provided price support for the price of Crude Oil. A further drop in the US Dollar, which is sure to see volatility with the FOMC meeting on Wednesday, September 20 could further support the price of Oil.
As demand forecasts shift higher, check out our free forecast on Crude Oil prices
Daily US Oil Chart: Breakout above resistance and sentiment favors approach to resistance
Chart Created by Tyler Yell, CMT
US Oil Insight from IG Client Positioning: sharp increase in net-short position keeps ST focus higher
The sentiment highlight section is designed to help you see how DailyFX utilizes the insights derived from IG Client Sentiment, and how client positioning can lead to trade ideas. If you have any questions on this indicator, you are welcome to reach out to the author of this article with questions at tyell@dailyfx.com.
Oil – US Crude: Retail trader data shows 44.2% of traders are net-long with the ratio of traders short to long at 1.26 to 1. The number of traders net-long is 2.4% lower than yesterday and 28.5% lower from last week, while the number of traders net-short is 1.1% higher than yesterday and 43.2% 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. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil – US Crude-bullish contrarian trading bias(emphasis added.)
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Written by Tyler Yell, CMT, Currency Analyst Trading Instructor for DailyFX.com
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