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Crude Oil (WTI) statistical and technical analysis

The current price of Crude Oil (WTI) is 82.40 (November 08, 2021). The first reaction of the WTI price after the Joint Ministerial Monitoring Committee (JMMC) supported the decision of OPEC to ease cuts by 400 thousand in December was a decline. However, the price is again above 80 USD. Let us, therefore, 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 -1.95% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.91% and -0.93% . FridayΒ΄s return was 3.12% , well below the first standard deviation. Our scoring is currently negative (-1 ) for the month-on-month change and -1 for price indexation. Therefore, it is currently in a slightly negative phase of the cycle. Both scorings range from -3 up to 3 . The estimated development of cycles 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 currently support bullish sentiment. In the event of a decline, the monthly MA may be the price support.

WTI daily price development Source: WALFIR

Since our last analysis, there have been stronger upward trends with a maximum level of 4 consecutive days. The maximum for the last 3 years is 8 days. Downward trends did not exceed more than 2 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 (3.11% ) to estimate Stop Loss orders for our positions. The current value is 2.85% , which is slightly below the average. Approximately 90% confidence interval (return between -3.60% and 3.60% ) 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

The basic technical analysis points to positive sentiment this year, as the market price is creating higher highs and higher lows. The last uptrend leg rose by more than 20 USD after a rebound from the demand zone (green rectangle), where is also the psychological level of 60.00 . However, there is a bearish divergence between price development and the RSI that has developed in recent months. The psychological level of 77.00 along with the short-term MA could be an important support if the market price falls lower.

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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