Talking Points
- Extreme in negative sentiment favors an upside reversal
- Important support seen around 91.00
Sentiment in Crude as measured by DSI (Daily Sentiment Index) fell to just 9% bulls on Tuesday. As we have pointed out in the past, such extremes in sentiment are a characteristic often seen around market turning points and is a major variable we look for when identifying potential counter-trend trading opportunities. Another major variable we look for is a supportive cyclical picture. In Crude we see potentially important turn windows next week and around the 22nd of the month. Our biggest problem with Crude at the moment is price given the commodity is still a ways away from our idealized level of 91.00. This marks a convergence of the 2nd square root progression of the year’s high and the 78.6% retracement of the April to August advance. Should Crude fall further and test this support zone during next week’s cycle turn window we will look to operate in the commodity from the long side.
Charts Created using Marketscope – Prepared by Kristian Kerr
Source: DailyFX
LEVELS TO WATCH
Resistance: 95.80 (Fibonacci), 98.90 (Fibonacci)
Support: 92.70 (June 24th Low), 91.00 (Gann)
Strategy: Buy Crude
Entry: Buy Crude at 91.10
Stop: 1-day close below 90.50
Target: 95.80
-- by Kristian Kerr, Senior Currency Strategist for DailyFX.com