Summary:
- Oil.WTI drops 1% to fall back towards $56
- Last week saw price recover after notable sell-off
- Oil speculators have record long positions
One of the biggest movers today has been oil with both Brent and WTI falling lower at the start of the week. Any declines seen in the Oil.WTI price could be exaggerated due to the extreme high levels of speculative positioning in the market. These net-longs, which can be seen as a contrarian indicator, reached 596k contracts last week which is the highest they’ve been in more than a decade. This number includes a rise of 179k in the past 5 weeks as traders have piled-in on the long side of the market.
Should price fall further then there could be a rush to cover these longs which would lead to more selling pressure and may lead to a swift decline in the market. (Other markets which have potentially interesting levels of positioning data can be found here.)
Speculative positioning in Oil has reached its net-highest level in more than a decade. Source: COT report
Oil.WTI had a soft start to last week with the market lower on both Monday and Tuesday. The middle of the week saw a failure for the bears to push home their advantage despite some unexpected increases in the inventory data and on Friday the market surged back towards its highest level of the week. This resulted in a long wick below on the W1 candlestick which indicates buying pressure when the market dips. Let’s now take a look at the technical picture for this market.
Weekly:
Last week a strong recovery on Friday saw a long wick form below the candlestick. Source: xStation
Daily:
The market remains in an uptrend with a pullback to the 21 EMA attracting buyers last week. Source: xStation
4 hourly:
The move higher on Friday ran into resistance at the 61.8% fib retracement of the drop from the all-time high at 56.73. This could now be viewed as possible resistance. Source: xStation