Crude Oil Prices Soar, Mostly Sealing the Fate of a Fourth Monthly Gain. Where to?

Crude Oil, WTI, Retail Trader Positioning, Technical Analysis – IGCS Commodities Update

• Crude oil prices all set for a 4th consecutive monthly gain?
• Still-bearish retail trader exposure offers a bullish outlook
• Prices just barely break above a key zone of resistance

Crude oil prices rocketed higher on Wednesday, soaring 3.6 percent in the most aggressive day since early June. The commodity is on course for a 4th consecutive monthly gain. Meanwhile, retail traders continue increasing bearish exposure. This can be seen by looking at IG Client Sentiment, which tends to function as a contrarian indicator. Will this spell further gains for oil?

Crude Oil Sentiment Outlook – Bullish

According to IGCS, only about 30% of retail traders are net-long crude oil. Since the majority are biased to the downside, this continues to hint that prices may rise down the road. Meanwhile, upside bets have decreased by 10.3% and 16.32% compared to yesterday and last week, respectively. With that in mind, overall exposure and recent changes offer a stronger bullish contrarian trading outlook.

On the daily chart below, WTI has just barely closed above the 93.72 – 92.43 resistance zone from highs seen in November. That has opened the door to extending the uptrend since earlier this year, exposing the 100% Fibonacci extension level at 95.63. Just beyond that is the August 2022 high of 97.65, which may hold as key resistance.

But, note that there is a negative RSI divergence showing that upside momentum is fading. In the event of a turn lower, dropping through the 93.72 – 92.43 former resistance zone places the focus on the 20-day Moving Average. Just below that is the 61.8% extension at 88.75.

Crude Oil Daily Chart

Chart Created in Trading View

— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com