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Market update: Crude oil price soars to resistance as retail traders become more bearish


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Crude oil prices close at highest since mid-November; retail traders become increasingly bearish, while WTI faces the 61.8% Fibonacci extension point.

 

original-size.webpSource: Bloomberg

 

Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Wednesday 13 September 2023 05:46

Crude oil sentiment outlook: bullish

Crude oil prices are on pace to rise over 1.8% this week so far, with WTI also aiming for a fourth consecutive monthly gain. In response, we can see that retail traders have been becoming increasingly bearish the commodity. This can be seen by taking a look at IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, will oil continue higher next?

According to IGCS, only 37% of retail traders are net-long crude oil. Since the majority of them are biased to the downside, this hints prices may continue rising down the road. This is as downside exposure increased by 10.17% and 12.70% compared to yesterday and last week, respectively. With that in mind, the combination of overall exposure and recent changes offers a stronger bullish contrarian outlook.

US crude oil – IG Client Sentiment

 

original-size.webpSource: DailyFX

Crude oil technical analysis

On the daily chart below, WTI has closed above a string of highs set over the past few days, reaching the highest since the middle of November. The push higher has also brought WTI to the 61.8% Fibonacci extension level at 88.75, which is immediate resistance. A confirmatory breakout higher exposes the 92.43 – 93.72 resistance zone from October.

That would open the door to an increasingly stronger bullish technical conviction. Meanwhile, immediate support seems to be the 84.84 inflection point from August. Just below that is the 50-day moving average (MA), which could reinstate the broader upside focus in the event of a stronger dip lower.

Crude oil daily chart

 

original-size.webpSource: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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