Market update: Retail traders still bearish about crude oil price forecast
Crude oil prices aiming for second weekly gain; retail traders continue to become bearish, although early-warning reversal signs are evident.
Crude oil sentiment outlook bullish
WTI crude oil prices are aiming for a second consecutive weekly gain so far. Strong gains since June meant that retail traders became increasingly bearish on the commodity. This can be seen by taking a look at IG Client Sentiment (IGCS) index, which frequently works as a contrarian indicator. With that in mind, could further gains be in store for oil.
According to IGCS, about 39% of retail traders are net-long crude oil. With most of them being biased to the downside, this hints that prices may continue to rise down the road. Meanwhile, downside exposure has increased by 6.3% and 32.95% compared to yesterday and last week, respectively. With that in mind, the combination of overall positioning and recent changes offers a stronger bullish contrarian trading bias.
IG Client Sentiment index
Crude oil technical analysis
On the daily chart below, there are a couple of preliminary warning signs that oil is looking increasingly toppy. For starters, a Bearish Harami candlestick pattern has emerged over the past 48 hours. While downside confirmation is lacking at this time, extending lower in the aftermath of this formation could increasingly point towards a reversal.
Meanwhile, negative relative strength index (RSI) divergence shows that upside momentum is fading. That can also at times precede a turn lower. Immediate support is the 84.845 inflection point from August. A breakout below this exposes the 50-day moving average (MA). Otherwise, near-term resistance is the 61.8% Fibonacci extension level of 88.75.
Crude oil daily chart
This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.