Thursday, November 3, 2016

Bear Oil Trend Still Strong

Crude oil traded lower today and has lost $7.85 or over 14% from the October 19th 52.22 high in December futures (CLZ6).  Today marks a 10th new session low since that Oct 19th high, so the bearish trend should be considered ‘stretched’.  However, there is currently nothing outside of this stretched condition that gives warning against an otherwise technically strong bearish trend. 

The main reason cited (‘Oil Primed for $25 Gain, But...’) for recommending bearish positioning when Oil on Oct 19th was trading at $51.70 was that traders had already positioned for a bullish advance that projected gains of 48% ($25) from then prevailing.  I argued that based on its merits their positioning strategy, it was oversubscribed and at risk of coming undone.  Open interest had come to within 2% of the record by early October and the level of participation in advancing price action waned on the approach of the recent high. 


The longs have not exited their positions.  Else, they have found others willing to take their place.  Open interest has actually increased by 68,000 or nearly 4% since October 19th.   This gives indication that the bearish trend currently in place is strong and we should await the exit of weaker longs before deciding ourselves take profit on bearish positions.

Support should be expected at or around 43.40.  A settlement at or below 43.43 would suggest further weakness still.  Conversely, a settle today or tomorrow at or above 45.83 would suggest a changed sentiment and would call for profit taking on any short positions.    

See also (Crude Oil; Impact Report - Bearish View)

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