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

• Crude oil prices gapped upward, ended Monday 4.35% higher
• Hamas’s attack on Israel may have oil disruption implications
• Retail bets are still net-long, what are key levels to watch?

Crude oil prices gapped higher at Monday’s open and closed the session 4.35% higher, marking the best single-day performance since early April. This followed weekend developments as Hamas attacked Israel, inflating supply disruption woes. According to Bloomberg, the outbreak “threatens to embroil both the US and Iran”. The latter has recently been a contributor of extra supply this year.

In response, retail traders have been increasing upside exposure in crude oil as of late. This can be seen via IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, while supply disruption fears may offer near-term support, increasingly bullish retail bets may serve as a bearish prospect for oil.

Crude Oil Sentiment Outlook – Bearish

According to IGCS, about 73% of retail traders are net-long crude oil. Since most of them remain biased to the upside, this continues to hint that prices may fall down the road. This is as upside bets increased by 19.36% and 94.04% compared to yesterday and last week, respectively. With that in mind, recent changes in IGCS offer an increasingly bearish contrarian trading bias.

Looking at the daily chart, WTI bounced off the 38.2% Fibonacci retracement level of 82.99 following recent fundamental developments. This also undermined the breakout under the 50-day moving average, which has since been reversed. Resuming the uptrend entails a push above the 92.62 – 94.98 resistance zone. Meanwhile, breaking under support exposes the midpoint of the retracement at 79.29.

Crude Oil Daily Chart

Chart Created in Trading View

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