Oil Tests Support While Traders Abandon Energy ETFs

Price & Momentum
First, let’s look at crude oil on a weekly chart with a momentum indicator plotted below price. We can see that oil is testing support at $66, which has been a critical price level in the last several years. Then turning to momentum, it’s currently “oversold’ but may soon begin turning higher. When it has, specifically when the Stochastic rising above 20, has been a bullish sign for oil prices at least in the following few weeks if not to begin a new intermediate trend higher.

Positioning

The positioning of ‘smart money’ players in crude oil have been buying this dip. Below we can see the data for Producers and the more broad, Commercial trader groups based on COT data. Both show a move to being net-buyers in oil. You can see that historically Commercials stay net-short crude, hedging exposure in their primary business. But now they are holding a 93rdpercentile position, owning a net 17,000 contracts long. A move to being net-buyers has typically been a bullish sign for oil prices going forward.

Sentiment & Mean Reversion

Finally, we’ll take a look at the ETF fund flows data. Below is a look at the 1-month flows for five popular energy-related ETFs, For the last couple of months traders have been pulling out of Energy funds with the 1-month flows at one of the lowest levels this year. Looking at the data from a z-score perspective, we are just shy of a 2-sigma level in flows. Sticking with the z-score look, price is also stretched, below 2-sigma, matching prior extreme lows like in January ‘24, May ‘23, August ‘21, and October ‘20.

From here we can see that with crude holding above support, 'smart money’ buying the dip, sentiment for the sector extremely bearish and price over-extended. A potential move higher in this space becomes one to watch keep an eye on.

Want to subscribe to Thrasher Analytics? Use code “substack” to get 15% off any of the three subscription options. Visit www.ThrasherAnalytics.com to learn more.

Disclaimer: Do not construe anything written in this post or this Substack in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned. 15% discount code “substack” applies to first subscription charge for time period selected upon subscribing, renewals will be at original price.