18 Oct Daily take on WTI crude oil
Daily take on WTI crude oil
This is my daily take on the WTI crude oil market. I will keep these post short and to the point. The purpose of these posts is for me to set up my bias for the day and look for signals to start taking positions.
Sources will be listed at the end.
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Here it goes…
WTI has positive and negative correlations to other financial instruments and I will list these here to show the reason for my bias. I have three categories: Downward, neutral and upward pressure. Downward pressure means that the items listed have a negative effect on WTI crude oil and is cause for a short-bias and vice versa. Under these I will list the items I think create a bias in that direction.
The commodities that have a positive correlation with crude oil are mostly looking green. Although WTI is one of them, so only have is green and half red. But because of the green nod of the WTI I am going to put this under upward pressure. WTI shows open at 51.92 with a high of 52.16 and a low of 51.92. A change of 0.24 dollars.
These have a negative correlation on WTI so this looks like it’s pressing upwards as well. Yesterday these had positive numbers but that changed overnight.
Investing.com — Crude oil prices gained in Asia on Wednesday as industry estimates of U.S. inventories showed a large that expected drop in crude, though products showed gains over expected declines.
Crude oil inventories fell by 7.130 million barrels, the American Petroleum Institute (API) said oin Tuesday, more than expected as gasoline stocks rose by 1.94 million barrels and distillates gained 1.64 million barrels missing expectations of declines.
Overnight, crude oil prices settled flat on Tuesday as expectations of a ramp up in U.S. production weighed on sentiment while easing conflict in Northern Iraq between Iraqi and Kurdish forces lessened concerns over potential supply disruptions in the region.
Crude oil prices came under pressure on renewed oversupply concerns following data indicating that U.S. producers will increase output.
The recent uptick in crude prices above $50 a barrel is widely viewed as an incentive for shale producers as it’s the price level at which they can ramp up output.
Traders said that prices were pushed up by a drop in U.S. crude inventories as well as concerns that fighting in Iraq and mounting tensions between the United States and Iran could affect supplies.
On the 4‑hourly chart we can see that prices have been moving above and below the first Fibonacci channel line. Even though momentum seems to have lost a bit we can’t really know if prices will move up or down. What I do think we can know is that a break of ‘formation’ is going to happen soon. Either between the Fib. channel line and the orange resistance line or on the downside. Meaning that same Fib. channel will function as the resistance trend line and the lower orange trend line as the support line. Let’s see what happens.
On the 30-minute chart we can see a bit better that at this moment prices have reached the resistance trendline and are most likely to go down. However, at this moment it is a ‘low volatility time’ it might just ‘cruise’ right through. We’ll have to wait and see.
On the 5‑minute chart we can see what I meant about the low volatility a bit better. There’s not much action going on that builds the momentum for those pressure points I explained earlier in previous points. If you’d like to know what these are please feel free to leave a comment or contact me directly. I’d be happy to share with you the findings of my learning so far.
So I would say that I am still more inclined to short because we have returned to earlier highs. At these highs I said prices would go down. I am wondering if all that is happening in Iraq and Iran is enough to create momentum for prices to shoot through the daily chart resistance trend line that is still in a downward trend. This might be the point where we will see this line break and welcome in a bullish era. If we break this current formation to the downside we can probably see prices go down to 50.20 again. If we break to the upside we can see prices go to 55 dollars a barrel. Another big factor is going to be the release of the EIA report later on today. Let’s have a look at some entry and exit setups.
Entry and Exit
If we break the 52.20 level I’d say we’re looking at a downside move. Especially after breaking 52.05. So for a move to the downside I’ll be looking to short from those points on. If we break to the upside I’ll be looking to go long at 52.41 and my target will be at least to 52.60. I think there will be a bigger move since it is a critical break in my opinion. The fundamentals surely support a move to the upside but we’ll have to wait and see. Exciting to see what will happen today.
Thank you as always for being a part of my journey into becoming a trader. Please feel free to comment or ask questions. Let me know what you think.