We have seen crude oil hand back 17% in the past five days. And with prices stabilising above a support cluster and holding up to US dollar strength, the path of least resistance over the near term could be higher. Even if it is still in the process of forming a potential bearish reversal pattern on the weekly chart.
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WTI Crude Oil Holds $90 – Bounce Incoming?
On Tuesday 15 September, I warned that without a fresh catalyst, I was suspicious of crude oil breakouts. While WTI closed the day higher by the day’s close and at a 4-month high, it was short lived. And only marginally above the 105.21 high. And since then, we have clearly seen the bearish mean-reversion I sought.
But now I suspect the pullback has gone too far. Note the tweezer bottom on the daily chart around the 50-day EMA, and with both of those candles with above-average volume – it suggests bulls may be accumulating. And with prices now back above the September VPOC, dips may be favourable while prices remain above 88.67 swing low.
I have a conservative upside target around 96 for now – near the monthly VWAP. But if tensions in the Middle East return, then so does oil’s upside potential.
Source: NYMEX, TradingView
WTI Crude Oil Positioning: COT Report
Large speculators remained net long 136k contracts last week, though effectively flat from the week prior. And that is because this set of traders are seemingly hedging their bets with longs and shorts rising in tandem. Total open interest has been rising alongside the rally into the recent highs, meaning the rebound was robust and supported by weight. But unless we see a sharp reversal higher from here, it seems likely WTI crude oil will form a 3-week bearish reversal pattern called an evening star formation. So, unless a suitable catalyst arrives to revive the rally, bulls may want to tread with caution over the near term.
Source: NYMEX, CFTFC (COT), LSEG
