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Chart Of The Day: Oil Pullback Before Decisive Breakout

Published 04/08/2015, 12:06 AM
Updated 07/09/2023, 06:31 AM

WTI Crude Oil

WTI Crude Oil (Daily)

WTI tested the $54 resistance level yesterday. While this is at least the 3rd time this level has been tested during 2015, it is the first time since February so some pause/pullback is to be expected before a decisive breakout takes place.

Oil crash analog to the 1980s:

Oil Price Plunge 2012-2015 vs 1983-1988

The analog chart to the 1980s oil crash offers a bullish view for the oil price outlook for the rest of year.

We have seen a nearly 1,000,000 contract surge in crude oil futures open interest since the end of last year:

Oil Futures Open Interest: 2013-2015

This phenomenon can be partially explained by the decline in price which makes the notional dollar value increase less noteworthy. However, the primary factors involved in this surge in open interest are increased hedging by producers and increased speculation by traders and hedge funds.

Disclosure: Via Energy and Gold.com.

Original post

Latest comments

Thank you for this well written piece. I concur with the sentiment that the current drop is just a temporary pullback. These oil prices are currently at an extremely depressed level and it will only be a matter of time before the oil price breaks out. We're already starting to see some signs of the oil price firming back up.
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