WTI crude oil remains trapped, bitcoin looks set for a bounce

I noted in this week’s COT report that large speculators and managed funds continued to close longs in exchange for shorts on WTI crude oil futures. This has dragged net-long exposure for both sets of traders down to 11 and 1-weej lows, respectively.  With short bets on the rise, further losses cannot be ruled out. However, as crude oil has already retraced -12.3% from its April high, I had been expected a retracement higher at the very least.

Last week prices were flat during a narrow-ranged week to form a doji, which itself suggests a trough may be near if not in place already. Yet crude oil is not short of resistance levels nearby which seems to be scuppering hopes of a decent rebound. The $80 handle sits just beneath the 200-day MA, and Friday’s selloff from those levels shows us that traders are clearly watching the pivotal zone between $80 - $80.20.

Yet support at $78 is also on hand to support prices each time crude oil tries to break lower. Since last week we have seen three intraday breaks below $78, yet each time the market closed the day back above it. And until momentum tips its hand, range traders seem more than happy to trade the range with bids around $78 and offers around $80.

Should we see a break above $80.20 (which also clears the 200-day average) then my upside target becomes the gap just below $82. Yet we may need to see a daily close below $78 before assuming another leg lower has begun, in which case $76 comes into focus near the three lower wicks in February.

Bitcoin technical analysis:

Regular readers will remember that I correct to be suspicious of runaway gains when Bitcoin futures surged towards the $60-$70k mark. And that was simply because each time it has done so in the past has resulted in eye-watering losses of 50% - 90%. I very much doubt we’ll see a pullback of such magnitude any time soon, if at all, given the higher levels of liquidity since institutional money has taken over. Besides, bitcoin essentially tracks the stock market these days, and as asset managers remain net-long Wall Street indices and now once again short VIX futures, perhaps bitcoin prices can remain supported for now.

In fact, dare I say things may be looking ‘up’ for Bitcoin, at least from a technical perspective.

The price action from the March high appears to be corrective. Yet its most recent leg lower found support around a 50% and 38.2% retracement level and 100-day EMA. A subsequent leg higher has since seen a retracement lower, which for now at least is trying to hold above a 50% retracement level. Also note that volumes were declining throughout the assumed correction (which shows a lack of aggressive bear action) and RSI (14) reached oversold alongside the price low. In this case, I am using 40 as oversold due to the uptrend on the daily chart.

As I remain sceptical that bitcoin will simply break to new highs, I am only seeking near-term bullish setups. And any pullback towards the 60k level could appeal to bulls for a cheeky swing trade long. Potential upside targets for bull to consider are the $65,500 level and 67,950 high near a high-volume node.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge