Sunday, January 31, 2016
CL Crude Oil Commitments of Futures Traders COT Weekly Chart and USO OIl Fund Daily Chart
The oil COT chart was highlighted a couple weeks ago and the comment at the time was that the close proximity of the blue and red bars towards the centerline, the most squeezed in for a long time, indicated a bottom in oil. In addition, the prior two key lows in March and August occurred with bars squeezed in towards the centerline of the chart.
So a bounce occurs in price and the bars expand outwards which occurs during a rally in price. The daily chart shows the universal positive divergence across all indicators, as well as oversold conditions and the falling wedge behavior, that created the launch in price. The USO oil price is well below the moving averages so a mean reversion higher is needed.
Oil should rally higher in price until the COT bars print inside the red circle. Does it happen this week or one month from now? There is a cluster of resistance formed during December at the 11-ish area for USO. Oil prices are expected to float higher unless a negative news event occurs to collapse prices lower such as Iran ramping up production or Russia refusing to curtail production. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note: The COT chart is provided by Cot Price Charts a very useful and informative site and the chart is annotated by Keystone.
Note Added 8:24 PM EST on Monday evening, 2/1/16: WTIC oil crashes -7% today down to the 31.32 level. Price is taking a rest from the launch from under 27 to 34 over the last two weeks. More oil volatility is expected. The weakness in the China PMI took wind out of oil's sails as well as the OPEC, Non-OPEC nations and Russia not wanting to cut production rates. Oil is trading emotionally off the news bites.