WTI Crude Technicals – Breaking 89.0 as sentiment shifts

Oil has been trading between 87.5 – 89.0 for the past 2 days, as commodities continue to recover from previous week’s huge sell-off, but bulls were starved off fundamental reasons to continue buying beyond the 89.0, which resulted in 89.0 holding on strongly. Yesterday was the emancipation for the bulls as 89.0 was finally breached toward the end of US trading session. The American Petroleum Institute (API) report released yesterday was the catalyst, revealing that inventories has fallen by 845K barrels.

Hourly Chart

The ascension higher wasn’t without some harrowing experience for the bulls though. API report only served to push price just under 89.0, and price was already looking weak with a bear candle during midday New York trading hours. The false rumor about White House being bombed didn’t help bulls either, which resulted in price dropping sharply to 88.0 immediately, before prices rose back a few minutes later after everybody realizing that it was a hoax. However, the hoax allowed the bulls to realize that perhaps Crude Oil sentiments may have shifted slowly to the bullish side, with the long wick unable to break 88,0 convincingly not to mention test the rising trendline support below. Price subsequently recovered with bulls smelling blood, resulting in 89.0 finally broken.

Early Asian session tried to break below 89.0 once more, but bulls were steadfast and repelled the sell-off in convincing fashion, reaffirming the shift in underlying sentiment from a bearish to a bullish one.

Daily Chart

From Daily Chart, we can see the same bullish reversal scenario with the double top pattern invalidated. 90.0 remains as the last significant resistance left for bulls as a break above may result in acceleration towards 92.0 and further the scenario of a slight uptrend from Nov ’12 lows.

Fundamentally nothing much has changed though. Global demand for energy continue to look weak with manufacturing sector falling like domino all around the world. It remains to be seen whether API’s report of higher demand is a reflection of long-term fundamental or simply short-term volatility. If it is the latter, we may easily see bearish actions taking over again if 92.0 or 90.0 fails to break. Department of Energy’s numbers to be released later today will hence play a huge role in shaping current sentiments. As bullish sentiment is still in its infant stages, a bearish DOE number may tilt price below 89.0 once again and reverse sentiment back to the bear side. On the other hand, if the numbers stack up nicely with what API has showed us, expect bullish sentiment to grow firmer and price may accelerate faster higher as well.

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