Are We Entering a Bull or Bear Market? A Crude Oil Futures Technical Analysis | StoneX

In an August 2020 blog post, we broke down the ongoing long-term bear market for West Texas Intermediate (WTI) crude oil futures. At the time, the market showed few signs of breaking out of its consistent downtrend. What a difference a year makes!

So is the global oil complex getting ready for a new bull market? Read on to learn more about 2021’s WTI crude oil futures technical analysis and whether the energy markets have finally shifted gears.

Crude Oil Futures Technical Analysis 2021

When taking a look at the macro picture for WTI crude oil, it is important to remember that the current front-month contract has been listed for more than a decade. According to the CME’s WTI futures contract specifications, “monthly contracts are listed for the current year and the next 10 calendar years and two additional contract months.” However, the traded volumes of deferred-month contracts range between being sparse and nonexistent.

For this crude oil futures technical analysis, we’ll be looking at the monthly chart for the CME July 2021 WTI contract. Accordingly, the focus will be on evaluating long-term pricing data within the time frame of Nov. 2, 2015 to June 3, 2021.

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Here are four key technical observations to be aware of:

1. From Nov. 2, 2015 to May 31, 2018, WTI traded within a tight range of $44.90 and $58.75. Over this period, prices fell a modest $0.02 per barrel, from an open of $56.85 to $56.83. Essentially, this is a long-term crude oil market consolidation pattern.
2. In October of 2018, WTI broke out to a high of $66.31. This figure held as a long-term swing high until it was eclipsed in March 2021. At the time, March 2021’s high of $66.61 became the current five-year WTI top.
3. For any modern crude oil technical analysis, it is important to thoroughly scrutinize the COVID-19 meltdown of March-April 2020 and subsequent recovery. During April 2020, CME July 2021 WTI futures posted a bottom of $30.00. Since that time, the only significant monthly retracement occurred from late August to early November 2020. During this period, prices fell from a top of $45.97 to a bottom of $36.69 (20.1 percent). Despite the bearish pressure, WTI remained firmly above the then-current monthly wave 62 percent Fibonacci retracement level ($35.99). This was a bullish indicator, and the summer 2020 uptrend remained technically intact.
4. Since the late August to early November 2020 pullback, WTI posted six out of seven winning months (November 2020 through May 2021). The only negative month was March 2021, during which aggregate pricing fell 1.81 percent and settled at $59.03, down 11.3 percent from the freshly posted five-year high ($66.61). Although steep, March 2021’s retracement came up well shy of the November 2020 low/March 2021 high 38 percent Fibonacci retracement ($55.18). Again, this was a strong bullish indicator and signaled that the uptrend in WTI crude oil was gaining strength.

In addition to the Fibonacci retracement crude oil technical analysis, a key long-term moving average was also eclipsed. When January 2021 trade began, July 2021 WTI broke above its 200-week simple moving average ($50.85). This was extremely bullish because it was the first time WTI had traded above this threshold since the pre-COVID era during the onset of 2020. As of this writing, WTI prices remain upward of $16.00 above the 200-week simple moving average.

What Does the Future Hold for Global Oil?

As we roll into the second half of 2021, several fundamental factors have the potential to drive prices higher over the intermediate to long term. The COVID-19 global economic reopening, Biden-era green energy policies, and shifting Middle East dynamics are a few of the primary bullish underpinnings. According to the crude oil technical analysis above, the post-COVID-panic uptrend shows no signs of stopping. A hard test of $75.00 at some point during summer 2021 is probable.

If you’re interested in approaching the futures markets from a technical perspective, be sure to check out our blog. It features expert market analysis, trading strategies, and much, much more.