WTI Crude Technical Analysis

WTI Crude saw some selling from the tag of the $75 price-handle last week. There was profit taking on the back of a very strong and bullish inventory report this week. At TradeGuidance, we see that Crude Oil has technical price setups and agreements that it trades to, both on the way up and on the way down. It is one of the instruments that gives you less of a worry about being able to join a trend as compared to the indices which are almost mechanically led by the ears by the broad market - the ES. In fact, the NQ and the more technical of the indices, the YM - almost follow ES all day long. WTI Crude on the other hand, gives us technical traders, an opportunity and a perspective of what to actually trade intraday or swing and expect to not be shaken out.

The EIA report on inventory yesterday which followed the API news of the draw from the previous days close is indicative of strong demand in the United States driven by growth. So why on earth did the prices tank? Well fundamentally, the pundits and analyst will give you several reasons why the price of WTI tanked on such a bullish EIA Inventory report. I will lay them out for you here in short form but to me, a technical analyst, none of these fundamentals provide enough reason for the move lower from the $75.27 recent top made before Crude pit hours last Tuesday. So here is a summary of the fundamentals that Oil analysts call out leading to the drop in prices in no particular order of importance:

  1. Saudi Arabias agreement to raise output
  2. The strength of the US Dollar from trade disputes
  3. The US China trade disagreements with China suggesting it will favor Iranian Oil versus any Oil from the US
  4. EIAs own estimate of rising WTI Crude Oil output
  5. Possibility of other OPEC countries raising production including Russia
  6. Free flowing Iranian Oil and US Sanctions being defied by other nations
  7. And last but not the least, a reduction of tensions in Libya which would mean a steady flow from there after a long time.

So it appears that with the aggressive move in prices lower despite news which provided reasoning for
an upward price movement, and the larger lower move today, we now see opposing moves for WTI Crude prices. The first case is the measurement of price movement from the trading hours low (69.23) to high made on the counter-trend move up (70.50) all in the intraday today which puts a long entry suggestion at 69.86 with a possible stop at 69.71 and a price target on Friday at 70.80. The counter case is a continuation of prices lower from the measurement of price from the low made last Friday (72.14) to the low made today, again 69.23 - which puts the possible short entry at 70.79 with a stop at 71.03 and targets lower at 68.54.
At TradeGuidance, we analyze the WTI Crude market for you twice daily together with a basket of 23 other futures instruments. Come join us - email us at info@tradeguidance.com. It will be the best decision related to your own trading that you will ever make!
Now here is a chart that contributed to our analysis:
CL-3-7-12-18