Crude Oil Price Forecast Talking Points:
- The ONE Thing: The bullish dominos keep falling for crude oil in 2019 with demand stable despite other economic indicators tipping into the red with sanctions and production cuts the world over
- Are you into crude? This podcast with Tracy Shuchart is a can’t miss Master’s class on oil trading
- Two weekly advances don’t traditionally make a trend, but the favorable momentum at the back of crude on the break above $55.61/bbl turns attention toward the $59.50-$64.67/bbl zone that will be explained below. Additionally, crude is holding above the 100-DMA
You are in luck, DailyFX’s Q1 2019 Crude Oil Forecast was just released
Technical Forecast for USOIL: Bullish
Chart Source: ProRealTime charting, IG UK Price Feed. Created by Tyler Yell, CMT
Crude is trading higher again (a common theme at the start of 2019), and WTI & Brent currently sit higher for the year by 26.6% and 25% respectively. While there has been concerns about the macro growth view, the US Dollar have failed to be a headwind above 97 on crude.
Traders would likely do best to view the current move higher in relation to the capitulation in December, which turned to a near 3 standard deviation move of the 12-month average, with the 12-month average at $63.45/bbl as some of December’s weak data points that caused concern has reverted higher, and Saudi Arabia production cuts add to further support under the price.
Looking for a fundamental perspective on oil? Check out the Weekly Oil Fundamental Forecast.
A Professional Crude Trader’s View on Crude
As Tracy Shuchart noted on the DailyFX Podcast, a lot of the commodity sector is receiving favorable fund flow after a disastrous Q4 in addition to short covering per the ICE Brent positioning report with Open Interest picking up after shrinking so much before the massive end of year drop, which makes for an attractive opportunity in a market poised to do well if global growth also picks up. One reason why growth might pick up is that a resolution of a US-China trade deal as the March 1 date approaches.
Adding Up The Momentum Factors for Crude Oil
February opened the month with a drop from ~$56/bbl to $51.50/bbl or roughly 1/3 of the December 24 to February 4 high. However, after holding $51/bbl, crude has taken off for again 12% gain that may be cementing bullish momentum.
As you’ll see on the chart, three things have my attention:
- The lagging line on Ichimoku is breaking above the cloud, a clear bullish momentum indicator
- The Fibonacci extension shows a target of ~$59-$64/bbl, which looks favorable after the shallow correction mentioned above was followed by such strong gains
- The price moved above the 100-DMA (not shown on the chart above) but could signal bullish momentum that may carry the price forward to the 200-DMA near the 12-month average at $63.45.
What’s the Risk to my Bullish Thesis?
Tracy said it best in our conversation on the DailyFX podcast this week, “crude traders love volatility, oil producing countries do not.” Traders should continue to watch supply continue to watch the bullish story, or at least, limited downside.
The thesis that price could continue to $59-$64 would need further bullish momentum as evidenced by the lagging line on Ichimoku remaining above the daily cloud, and price holding above the 26-median line (currently at $54.45/bbl.). That puts the view at risk. A break below the February low of $51.53/bbl moves me from bullish to neutral.
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---Written by Tyler Yell, CMT
Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as trading educational resources. Read more of Tyler’s Technical reports via his bio page.
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