Crude rallied again into an interesting junction. The nearest WTI contract is probably close to an intermediate degree trend reversal.
The technical, as well as behavioral evidence, hints to a nearby fade. Speculators’ sentiment rebounded and the oil industry shows elevated bullishness. There are striking similarities between the sentiment picture in early Summer 2015 and today. Subsequently crude plunged into a multi-year low from a very similar set-up. Crude’s wave pattern displays a potentially complete A-B-C zig-zag pattern from the late 2018 levels. Momentum diverged upon reaching into the latest highs.
Crude’s bear market rally interpretation of intermediate degree remains in line with the macro picture. That shows equities, Yen, 10y Treasury yields, and the US Dollar close to a minor degree reversal. It implies headwinds for crude.
There are two potential trading approaches to this. An outright short with a S/L at 64.10, which implies a 1/8 risk/reward is the first setup. The second setup triggers a short signal after an initial bearish impulse. It will have a slightly lower risk/reward but an additional element of confirmation. A print of 64.10 and above on the nearest contract implies further extension to the upside and invalidates the A-B-C pattern in the first chart below.
Do you want to know more about Crude? It is among our main products and discussed regularly. We focus on its cyclical trends and weekly patterns in our premium analysis.