7-Week Win Streak at Risk as Retail Traders Shift Exposure

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

• Crude oil price 7-week winning streak coming to an end?
• Retail traders are starting to turn bullish on the commodity
• This is a sign that further losses might be ins tore for oil

Despite Thursday’s push higher, WTI crude oil prices are on course to drop -3.5 percent this week so far. Not only would that be the worst week since early May, but it would also bring a 7-week winning streak to an end. In response, retail traders have started to become more bullish. This can be seen by taking a look at IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, is crude oil at risk of extending recent losses?

Crude Oil Sentiment Outlook – Bearish

According to IGCS, about 47% of retail traders are net-long. Since a slight majority are biased to the downside, this still favors a bullish contrarian trading bias down the road. However, downside exposure has decreased by 9.04% and 18.62% compared to yesterday and last week, respectively. With that in mind, recent changes in positioning hint that the price trend may soon reverse lower despite overall exposure.

On the daily chart below, WTI crude oil has confirmed a breakout under the near-term rising trendline from June. That is offering a near-term bearish technical bias. But, prices paused just above key support which is the midpoint of the Fibonacci retracement level at 78.66. If this price holds, a turn higher would place the focus back on the 81.44 – 83.48 inflection zone.

Keep in mind that recent losses followed a Bearish Engulfing candlestick pattern, underscoring a near-term downward bias. Still, further losses would place the focus on the 50- and 100-day Moving Averages. A bullish Golden Cross formed between them not long ago, underscoring a broader upside technical bias. As such, it would take further losses to reinforce a stronger bearish conviction.

Crude Oil Daily Chart

Chart Created in Trading View

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