Last week our work suggested that crude oil may have been closer to a bottom than a top because the Commitment of Traders report showed that small speculators were liquidating their long positions while large commercial traders were paring their short positions. The moves indicated that the market was going through a transition period and that sentiment may have been shifting back to the long side.
The aggressive buying during the last week in March is further confirmation that long traders were retaking control of market, setting up the possibility of additional upside action in April. The next Commitment of Traders report should confirm that buyers have regained control of the market.
The Nearby Monthly Crude Oil chart shows that the market posted a solid gain in March after reaching support on a Gann angle near $89.70. During April, this angle moves up to $90.92.
Click to enlarge.
Based on the main range of $116.14 to $80.92, a retracement zone has formed at $98.53 to $102.69. This zone is the next upside target.
Swing chart analysis indicates that the main trend is down, but that a move through $99.16 will turn the main trend to up on the monthly chart. Taking out both the 50% level at $98.53 and the swing top at $99.16 could provide the momentum the market needs to reach the Fibonacci level at $102.69. This is highly speculative but if new buyers continue to come into the market the idea of a strong rally during April can be supported.