Crude Oil Prices May Extend Gains as Retail Traders Turn More Bearish

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

• Crude oil prices are eyeing best month since October so far
• Recently, retail traders began increasing downside WTI bets
• IGCS tends to function as a contrarian indicator, will oil rise?

WTI crude oil prices rallied 2.2 percent on Tuesday, extending gains since the end of last this. The past 24 hours also marked the highest close since early May. The commodity is up about 6.2% in July so far. If gains are maintained throughout this month, it would confirm the strongest 4-week period since October, which was when WTI gained 8.4%.

The latest push higher brought the commodity to the edge of the 74.68 – 76.28 inflection zone – see chart below. As such, a rejection at resistance could send prices back lower towards the near-term rising trendline from June 28th. Confirming a breakout under the latter exposes support at 66.86 before the critical 63.60 – 65.72 zone kicks in.

Otherwise, climbing higher into the inflection zone and surpassing upper resistance at 76.28 exposes the long-term 200-day Simple Moving Average (SMA). This could hold as key resistance, maintaining the broader downside focus. Otherwise, extending gains would open the door to revisiting the 81.44 – 83.48 resistance zone that was reinforced in April.

Crude Oil Daily Chart

Chart Created in Trading View

Crude Oil Sentiment Outlook – Bullish

The IG Client Sentiment (IGCS) gauge shows that about 59% of retail traders are net-long crude oil. IGCS typically tends to function as a contrarian indicator. Since most traders are still biased to the upside, this suggests that prices may fall down the road. Recently, downside exposure has increased by 14.56% and 54.41% compared to yesterday and last week, respectively. With that in mind, these changes hint that the price trend may soon reverse higher despite overall positioning.

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