Chopping in the Oil: What the Charts and Sentiment Are Tell Us

12月3日

A few words about the sentiment in oil.
Graphically, the price is chopping around in a range, and there aren’t any clear indicators on where it might break out.

However, there are some signs: the options sentiment shows a slight positive bias, with decent portfolios of vertical spreads targeting above $75 gaining traction, although it’s still pretty questionable.

The positions of hedgers and other commercials are close to the maximum levels where we’ve seen reversals in oil prices over the last two years.In other words, the COT reports are also signaling that we’re not likely to head down, or we might see a false breakout followed by a reversal.

So, the working hypothesis for now is that oil is close to a local minimum, but the final word will come from the graphical models on the chart. Personally, I’m keeping an eye on an interesting trigger level at $73.47. I’ll be assessing oil’s prospects based on that level.