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Crude Oil (WTI) statistical and technical analysis

The current price of Crude Oil (WTI) is 75.16 (July 02, 2021). This commodity is currently testing the medium-term highs created in 2018. Rising inflation could further affect future price of oil. Let’s now look at statistical and technical analyzes.

Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 1.76% and -1.96% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.92% and -0.93% . Friday´s return was -0.09% , well below the first standard deviation. Our scoring is currently negative (-2 ) for the month-on-month change and -2 for price indexation. Therefore, it is currently in the negative phase of the cycle. Both scorings range from -3 up to 3 . The estimated cycles development based on our analytical system is shown in the following chart.

WTI daily price indexation Source: WALFIR

Different moving averages (MAs) help us better identify trends across multiple time frames. We use 3 basic MAs to find out which sentiment dominates each horizon. The purple line represents the monthly , the green line the 6 months and the yellow line the annual moving average. As we can see in the chart below, all WTI MAs are still in bullish sentiment. In the event of a decline, the monthly MA can be an important support for the price of oil.

WTI daily price development Source: WALFIR

Since the beginning of this year, we have witnessed more upward trends, the maximum level of which has reached 7 consecutive days. Downward trends did not exceed more than 4 days in the same period. However, the maximum decrease was 11 days in the measured period. We could use the average long-term ATR (Average True Range) obtained from daily data (3.37% ) to estimate Stop Loss orders for our positions. The current value is 2.75% , which only confirms the recent decline in True Range. Approximately 90% confidence interval (return between -3.6% and 3.6% ) is shown in the histogram below by a red rectangle.

WTI daily return distribution Source: WALFIR

We could use the last decile of low to high returns (6.00% ) to estimate Profit Targets, as shown in the chart below.

WTI daily low to high distribution Source: WALFIR

Basic technical analysis still points to the positive sentiment, as the price creates higher highs and higher lows. The WTI is currently very close to the medium-term highs created in 2018 . This level of around 77.00 could be important not only for bulls. However, rising inflation could raise the price above the psychological level of 80.00 . The market price is far from both moving averages, which could motivate bears. This scenario also supports the divergence between price development and RSI, which has developed in recent weeks. If there is a further decline, the next stop could be the demand zone (green rectangle), where is also the Fibonacci retracement level of 23.60% , along with the psychological level of 60.00 .

WTI basic technical analysis Source: TradingView

WALFIR Technologies is one of the three divisions of WALFIR s.r.o., which is based in Slovakia. The primary interests of this division are analytical, quantitative, and algorithmic...

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