WTI Coils Above $60
Matt Simpson May 9, 2019 5:09 AM
We’re cautiously bullish on WTI over the near-term and suspect it could be due, at the very least, a minor bounce.
Despite slipping from its highs, the trend structure remains bullish and prices have found support above the 50-day and 200-day averages. Furthermore, the 50-day average remains above the 200 and a bullish engulfing candle formed at $60 to form a likely swing low. With prices now coiling above this support zone, we think it could be due a bounce higher.
It’s touch and go as to whether price can fully recover and break to new highs, although the pivotal level around 64.80 makes a likely bullish target. If bullish momentum returns in full force, then this target can of course be revised higher for a potential break to new highs. Yet we remain hesitant to become too bullish given the pick-up of volatility on bearish candles, and slight shift in sentiment in last week’s COT report.
Although traders remain overwhelmingly net-long WTI, net-long exposure saw its largest weekly reduction since early February and the move was driven by an increase of short bets (+16.9k contracts) and a reduction of longs (-6.4k contracts). Whilst this doesn’t yet point to a change in trend, it could point towards a deeper correction. So this is why momentum needs to be assessed, as a minor break higher runs the risk of bears fading it to new lows. Either way, path of least resistance appears to be higher over the near-term.The coiling formation can mostly be explained by tension over trade talks. If a deal is reached and China’s tariffs are removed, it will be a major boost for sentient and risk assets are likely to rally. WTI is just one of the markets we’d expect to benefit, although do keep an eye on yen pairs as we’d expect a sharp reversal of losses as yen bears close out.
Disclaimer: GAIN Capital UK Limited (trading as "Forex.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, Forex.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by Forex.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although Forex.com is not specifically prevented from dealing before providing this material, Forex.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
For further details see our full non-independent research disclaimer and quarterly summary.