Commodities Market Analysis – US Crude Oil

* My first live market analysis of the year for US Crude Oil*

Happy Friday to you all! In this blog post I am going to give you a fresh technical and fundamental breakdown of US Crude Oil commodity and show you how I plan to trade it over the next few days and weeks.

Towards the end of last year (October through December), weekly buying of the price dips was a key play. Price was making perfect bullish waves from the support at $52 up to my target of $60 per barrel and even further thanks to the situation in Iran.

This is shown on the 4hr timeframe chart below.

US Crude Oil 4 hour timeframe chart

Bullish momentum was nice and consistent through the first half of the quarter and then in December price began to rise rapidly. Higher highs in price were made almost daily and when the tensions in the Middle East escalated, price rocketed to $65 per barrel.

You can see my previous long positions and technical analysis on TradingView by clicking on the links below.

https://uk.tradingview.com/chart/USOIL/eO8pBbZB-US-Oil-Long-Trade-TREND-CONTINUATION/

https://uk.tradingview.com/chart/USOIL/H2W18wt2-US-Oil-Long-Trade-TREND-CONTINUATION/

Alternatively, I have linked my previous US Crude Oil market analysis blog posts below so you can read through them if you are interested in learning more about trading this commodity.

https://diaryofafinancekid.com/2019/12/10/commodity-market-update-us-oil-december-19/

https://diaryofafinancekid.com/2019/11/20/commodity-market-update-us-oil/

As it currently stands, US Crude has found nice resistance at $65 per barrel and price showed a significant sell of on Wednesday after tensions eased and it appeared Iran may have stepped down to avoid a potential war.

Let’s look at the intraday price chart and I will show you the technical analysis for my potential trade entries over the next week.

US Crude Oil 4 hour timeframe chart
(as at today 10/01/20)

I can spot 3 key pieces of technical information that tell me I should be looking to short US crude on the intraday timeframes over the next few days/weeks.

  1. Bearish momentum is in play. The big sell off from $65 gives me confidence I will be onside with the near term momentum.
  2. The trend looks to be reversing with the bullish trendline now clearly broken.
  3. A lower low has been made crossing through the 1hr and 4hr 50 EMA’s. This supports the trend reversal theory.

I will now explain the main fundamentals that will move US crude oil over the next few weeks and then I will show you 2 potential short trade set ups.

Fundamentals:

USD weakness/strength will have an impact on the price of US crude oil. We have non-farm payrolls (NFP) unemployment data releasing this afternoon. A weak dollar will push the price of US crude as it is used as the base for all US crude oil transactions.

The tensions in the Middle East can also cause big price reactions in the markets, especially on gold, stocks and oil This is because Iran are an oil powerhouse, much like the US but Iran also controls the strait of hormuz. This is the small water passage where over 40% of global oil trade goes through this region. If there is any delay or blockages there then supply will be effected and price of oil will rise.

Global market sentiment. A bigger switch to risk off mentality will see the price of US fall in the near term because it is seen as a more risky long term investment. Investors tend to move cash out of oil and in to fixed income when global markets show signs of risk off sentiment.

And finally, it wouldn’t be my technical analysis if I didn’t check the retail trading sentiment data. US crude oil is now showing a huge net long bias of 73% across retail trading positions with a large weekly change of +105% long positions and -46% short positions. This is a large swing in bias.

Naturally, I take this as an extra confluence of my intraday short bias because the average retail trade will always be buying at the highs and selling at the lows once the majority of the price moves have been completed.

US Crude Oil Technical Trading Set Ups:

US Crude Oil 4 hour timeframe chart
(potential short trade entry 1)

This set up is my preferred short trade set up. To take advantage of the next pullback in price and enter on the forming of a lower high below the broken bullish trendline. I can then short oil down to new lower lows and maybe even the $55 support zone.

This set up would imply that price has the ability to pullback after the strong sell-off momentum that occurred this week. This can happen if todays NFP data helps it to do so.

US Crude Oil 4 hour timeframe chart
(potential short trade entry 2)

This potential set up is based on my own CB flag trading strategy that I use to trade momentum continuation in the markets. This could be a potential short trade entry because the bearish momentum from this weeks sell-off is quite strong so there may not be enough buyers to push price back up to the $63 price level.

Instead, price could consolidate at these lows and form a daily range around the $60 level before the sell-off continues and new lower lows are made. My profit targets are still the same with this set up at the the fib -0.27 extension and $55 support zone.

If you are interested in learning my CB Flag Trading Strategy then check out my Mastering the Markets retail trading course.

End Note:

Let’s see what today brings with the NFP data and how oil and USD trades in to the weekend. Both of the short set ups shown above have the potential to occur next week so US Crude Oil is now definitely on my watch list.

Useful Links:

All my technical analysis is done using the TradingView platform. You can get access via the link below.

https://tradingview.go2cloud.org/SH3bP

My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.

https://www.icmarkets.com/?camp=38537

FTMO Trader Funding Programme.

https://ftmo.com/?affiliates=335

Thanks for reading and please don’t forget to LIKE, SHARE and FOLLOW my blog to stay up to date with the latest market analysis and trading education posts.

DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

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