What Is the Smart Money Doing in Oil?

One of the reasons why I was bullish on Crude Oil a few weeks ago was because the commercial traders were buying. I consider the commercials the smart money and in most markets they can be very helpful if you know how to read what they are doing.

If you look at the above chart of crude oil you will see in the lower panel 3 colored lines. Lets just focus on the blue line which represents commercial activity.
What I look for is their level of buying and selling. I'm watching their net long or short position.

Notice when the blue line (commercials) gets to the -2200 level, the market tends to rally. This is what I observed a few weeks ago and was just one of the reasons why I was bullish on oil and oil stocks. What I find interesting right now is that the commercials actually increased their long position into this current rally. Usually the commercial traders will accumulate as the market falls increasing their net long position or sell into rallies lessening their long position. If you look at the blue line these past two weeks, the line has turned up as prices have gone higher which is unusual. The commercial traders are adding to their long position into the up move. That's very bullish in my opinion.

The next chart is a 23 year seasonal chart of crude oil. You can see we are now approaching a very bullish time of the year for oil. Crude oil tends to rally from about late February into May.

Given the position of the commercial traders and the strong seasonal time period, I will continue to play oil from the long side. We'll see how things unfold.