Crude Oil Finds Support Among Bearish Sentiment

It’s been nice to see oil prices fall as it’s made it a little less painful to fill up my gas tank. Commodities in general have been dancing to the deflationary drum beat over the last couple of weeks, oil ($CL_F) included.

The price of a barrel of light crude oil now sits at Fibonacci support, specifically the 61.8% retracement level. This happens to be the near the previous low we saw in 2012 when oil reached $84/barrel. Crude also sits below its major 50- and 200-day moving averages, leaving not much level to stop future weakness in the commodity.

It’s hard to see in the chart below, but when focusing on the last two candlesticks we can see a version of a tweezer candlestick pattern. Typically a bullish tweezer pattern would have a strong down day (red candle) which is followed by an up day(green candle), each of the lows of the two candles being at the same level – creating the appearance of tweezers. However in crude oil the bearish and bullish candles are reversed, invalidating a true tweezer pattern. What’s important is the level of support that held up two days in a row, and happened to be at a Fibonacci retracement level. At least in the short-term, buyers stepped in and held their ground.

Chris Kimble over at Kimble Charting Solutions posted a chart of crude at support going back to 2009. Chris, who does excellent work, also posted the COT data for oil which shows what he describes as bearish sentiment data towards the commodity.

Based on what the futures are doing this morning, it appears crude is bouncing higher, keeping the above mentioned support in tact. If the deflationary winds continue then the COT data may be right and oil could end up testing the 2012 low. We’ll see what happens.
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