Oil’s technical overview gets volatile following price plummet

Oil WTI Technical analysis, overview, strategies, and levels

A technical overview shift on the daily time frame to volatile, coinciding with the overview on the weekly time frame that had been showing signs of a breakout. Prior, the overview on the daily had been more consolidatory on expectations that we'd experience more rangebound days than volatile ones (and that has been the case over the past week or so), though once volatility hits and it tends to offer more sessions of it with prices going past key levels, contrarian reversals ideally initiated only after a significant move to avoid an initial stop out.

In terms of key technical indicators, we had a negative DMI (Directional Movement Index) cross occurring by one calculation (though not all given pricing differences), prices at the lower end of the bands, moving further from a key long-term moving average, and with an ADX (Average Directional Movement Index) reading moving closer to trending territory.

On the fundamental front it’s become more interesting, with a will-they-won't-they moment for releasing reserves to reduce Oil - US Crude prices that according to unconfirmed reports includes the US, China (its state reserve bureau saying they "are carrying out work of releasing crude reserves"), Japan and India; US President Biden asking the FTC (Federal Trade Commission) to see whether oil and gas companies are engaging in anti-consumer behavior in hopes of taking domestic gasoline prices lower. As for inventory data out of EIA (Energy Information Administration), there was a surprise drawdown of 2.1 million opposite expectations of a 1 million barrel surplus, gasoline down by 700,000 and a draw for distillate as well by 800,000.

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IG client* and CoT** sentiment for Oil WTI

When it comes to sentiment, retail trader bias has gone from a slight buy 54% yesterday prior to the plummet to long 60% as some shorts get enticed into closing out while some initiated buys at the short-term support level visible on the daily chart.

For CoT (Commitment of Traders) speculators in its latest report, they remain on hold and in extreme buy territory at 81%.

Oil WTI chart with retail and institutional sentiment

_{*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the previous trading day.}

_{**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.}