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Actual scenario and oil forecast

June 23, 2020

June 23, 2020

Commodity Market analysis: Oil forecastMikhail Hypov

**S &P GSCI and Crude Oil WTI: Technical analysis of oil market.

Candlestick analysis and fractal analysis. Wave structure analysis.**

My previous article reviewed the commodity market and [S&P Goldman Sachs Commodity Index][1] in particular. Today, I’ll proceed with the analysis of commodity groups. In the first place, I’ll analyse [oil][2] and [gold][3]. These commodity groups have some peculiarities.

![LiteForex: Commodity Market review: Actual scenario and oil forecast][4]

The dynamics of their long-term cost growth yields to [S&P500][5], for example (check the chart above). Thus, the composition of participants in these markets is somewhat different. There is no point in holding [gold][3] and [oil][6], or any other commodities, in the long term. That’s why the share of institutional investors here is much smaller than in the stock market. The main market participants are speculators, commodity brokers and large industrial holding companies. [Gold][3] stands out, though. It is often used as a protective asset. During a crisis, private investors grow more interested in this metal, which covers the industrial sector’s falling demand.

![LiteForex: Commodity Market review: Actual scenario and oil forecast][7]

I have highlighted 2 crisis events in the chart above: the year 2008 and the current crisis. Comparing the dynamics of those periods, we see that [gold][3] remains at the same levels or even slightly grows while the stock market falls. Despite the stocks’ global leadership as an investment tool, gold may be more attractive in the short term.

Why? Because investors tend to avoid risks. Gold’s higher growth dynamics means that the investors don’t feel confident about the stock market and diversify their portfolios to minimize risks. This behaviour pattern is a good indicator for macroeconomic analysis of the stock market.

![LiteForex: Commodity Market review: Actual scenario and oil forecast][8]

Let me make a small digression here. Compare the Bitcoin chart with [SPX][5], [GOLD ][9]and [OIL][6]. As you see, other assets show almost no growth, except gold. So, if you are a portfolio investor, think about holding a small % of your capital in cryptocurrency.

Technical analysis of oil

![LiteForex: Commodity Market review: Actual scenario and oil forecast][10]

First, let’s update the [oil][6] forecast I made in [March][11]. In the chart above, oil correlates with the commodity index. We can use this fact in technical analysis in order to filter market noise related to high volatility and see the picture more clearly.

Long-term scenario

![LiteForex: Commodity Market review: Actual scenario and oil forecast][12]

The 12-month time frame of [WTI Oil][6] is displayed in the chart above. Three key levels are seen here:

- the buyers’ level at 12.26 in 1999 when the strongest bullish wave began

-  the second level at 46.81. Another level of buyers who opened trades after the 2008 crisis

-  the third level is the sellers’ level at 100 USD per barrel. It was impossible to consolidate above it.

A long shadow is forming below the ultimate candlestick. It pulled back from the first level of 12.26 USD. According to the Japanese candlesticks, a “hammer” may be forming, but it is too early to speak about it now because there’s a shadow above and the body is big enough. A strong bullish signal will have been produced before the end of 2020 if the price has consolidated above 46.81 USD. In the long term, the bearish trend will continue. The pattern including a pullback like after 2008 may be repeated in the opposite direction (marked with the red arrow). This scenario will be confirmed if the [oil][6] price hasn’t consolidated above 46.81 USD by the end of the year.

![LiteForex: Commodity Market review: Actual scenario and oil forecast][13]

The chart above displays the GSCI commodity index which shows the same picture as the chart of [Crude Oil WTI][6] does. The exception is that the minimum didn’t test the support level at 169 points after the last fall. It means the bearish [oil][6] breakout was false. It’s a good example of how the GSCI filter works when applied to the oil market. Now we can say with more confidence that this level won’t be retested in the next few years.

Medium-term forecast

![LiteForex: Commodity Market review: Actual scenario and oil forecast][14]

On the 1-month time frame above, the wave pattern remained unchanged as compared with March’s [oil forecast ][11]. The pattern forming now corresponds well to the global scenario marked with the red arrow. According to this scenario, the price may go outside the limits of 46 USD per barrel in the short term. Then, it will proceed to fall to 20 USD per WTI barrel.

Short-term forecast for WTI oil price

![LiteForex: Commodity Market review: Actual scenario and oil forecast][15]

Have a look at the WTI weekly chart above. For sure, wave (a) in zigzag Y of the WXYXZ pattern is completed (the orange pattern inside the purple pattern). We see wave (A) nearing completion in the blue zigzag of wave (b) at the moment. We can’t say yet that wave (A) has fully formed, but obviously it has no further growth reserves because it’s located near powerful resistance levels:

  1. Traded area at 51 - 65 USD (blue oval);
  2. Extremum of zigzag of wave (a) at  42.33 - 47 USD (red circle);
  3. Global buyer level at 46.81 USD (green line);
  4.  0.5 fibo of wave (a) at 43.39 USD.

This cluster of resistance levels allows supposing that a future extremum and a bearish reversal will be at around 43-46 USD.

Trading plan for the next few weeks

![LiteForex: Commodity Market review: Actual scenario and oil forecast][16]

Prioritize short positions at 46 USD. A bearish signal should be confirmed by an indicator or a candlestick pattern.

Stop Loss is placed beyond 0.618 fibo of wave (a) at around 53 USD.

Target: a bearish correction at around 0.5 fibo of the last wave, 28 USD approximately.

Risk/Profit ratio: 2.8, which is almost a perfect value in the classic risk management system. Remember to set correct leverage and lot values. Observe your risk and money management rules.

Remember that you can open a short trade in [WTI][6] with a low commission at LiteForex. If you aren’t a trader, it’s time to start right now: the broker is raffling fabulous prizes to celebrate its [15th anniversary][17]. Everyone can win!

In my next article, I’ll provide a detailed technical analysis of the gold market and share a few more insights into related markets.

Subscribe and keep in touch!

Good luck and profits, everyone!

Yours,

Michael @Hypov

I’d like to remind you that all materials are provided for educational purposes only. They aren’t financial advice and don’t guarantee any profits. All trading decisions you make are your responsibility only.

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker [here][18]. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Use my promo-code BLOG for getting deposit bonus 50% on LiteForex platform. Just enter this code in the appropriate field while [depositing][19] your trading account.
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders

Price chart of USCrude in real time mode

![Commodity Market analysis: Oil forecast][20]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. www.liteforex.com/blog/analysts-opinions/commodity-market-analysis—global-outlook/
  2. my.liteforex.com/trading?type=oil
  3. my.liteforex.com/trading/chart?symbol=XAUUSD&returnUrl=true
  4. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.23/SPX_GOLD_OIL_hypov_1.jpg?w=30&s=991876a01784427f30ad4505965ec8f6
  5. my.liteforex.com/trading/chart?symbol=SPX
  6. my.liteforex.com/trading/chart?symbol=USCrude
  7. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.23/SPX_GOLD_OIL_hypov_2.jpg?w=30&s=97fd4055861fe556344639e8f48e3fee
  8. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.23/SPX_BITCOIN_GOLD_OIL_hypov_3.jpg?w=30&s=2d58d0164e2e2ed5626159612fc1d1ca
  9. my.liteforex.com/trading/chart?symbol=XAUUSD
  10. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.23/GSCI_OIL_hypov_4.jpg?w=30&s=0d0a9b7bb811512f16b4a1dc6911aaa6
  11. www.liteforex.com/blog/analysts-opinions/whats-happening-to-oil-prices/
  12. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.23/WTI_OIL_hypov_5.jpg?w=30&s=776fea909f556288a7fedd31507edf33
  13. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.23/GSCI_hypov_6.jpg?w=30&s=267c0ecf9cfad400128e29cd3fce1191
  14. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.23/WTI_OIL_hypov_7.jpg?w=30&s=21389a1b5299898dbf59e7d6ca957c71
  15. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.23/WTI_OIL_hypov_8.jpg?w=30&s=94d3981bca897f3ca5277b16167ba6ee
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  17. www.liteforex.com/contests/dream-draw/?_ga=2.62491052.1027453424.1589809964-2095657289.1460018267
  18. my.liteforex.com/?category=analysts-opinions&slug=commodity-market-analysis-oil-forecast&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
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  20. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.23/GOLD_WTI_OIL_hypov_logo.jpg?q=75&w=1000&s=88fa82aa4d0705e4051fadb798ab99eb