WTI - US OIL

All updates posted here are NOT real time and have a time-lag up to few hours to days depending on the bandwidth available with us to post here and on twitter. The updates are meant for information only. For the purpose of trading, real time updates are critical and mandatory. 

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Original post to Members - 10 Sep 2020

Posted here - 11 Sep 2020

[WTI October Futures Update] At a micro-level, WTI has now formed a key resistance at 38.40-38.60. It will need to surpass this level to render more traction to the bounce off the key support at 35.80-36.10. 

Failure to surpass 38.60 shall set up a retest of the key support at 35.80-36.10. A sustained break of this support shall expose the larger degree key support at 34.40-34.60 followed by 32.20-32.50.

At a macro-level, WTI continues to remain in a correction (retracement) wave within a bullish set up.

Please know your parameters & plan accordingly

Original post to Members - 08 Sep 2020

Posted here - 11 Sep 2020

[WTI October Futures Update] At a micro-level, WTI has bounced off the nearest key support at 35.80-36.10.

That said, WTI still continues to remain in a correction mode in a bullish set up at a macro-level. It shall have to at least surpass the key resistance at 40.10-40.30 to provide any indication of completion of the correction.

Original post to Members - 03 Sep 2020

Posted here - 04 Sep 2020

[WTI October Futures Update]


WTI has managed to bounce off near the key support. It has now formed a key resistance at 41.56-41.95 which is the first important hurdle.

Failure to cross this resistance shall result in a retest of the key support at 40.25 followed by 39.40-39.80.

Original post to Members - 02 Sep 2020

Posted here - 04 Sep 2020

[WTI October Futures Update] In the previous update (tagged), we had shared that WTI was approaching a zone of congestion around 43.80 near the larger degree key resistance at 44.10-44.30. We had also mentioned that failure to break through this resistance is likely to trigger a correction back to the key support levels. This is exactly what is playing out right now.

The next immediate key supports are at 40.50-40.70 followed by 39.40-39.80 where a micro-level bounce may unfold.

 

Zooming out to a larger degree, WTI is currently in a correction (retracement) mode within a bullish set up. The critical key supports at 37.10-37.40 and 38.30-38.60 are maintaining the sacrosanctity of this macro-level pattern.

Original post to Members - 27 Aug 2020

Posted here - 01 Sep 2020

[WTI October Futures Update] WTI has gained close to $2 from the key support at 41.30-41.60 shared in the previous updates. It has however slowed down its advance closer to the larger degree key resistance at 44.10-44.30. Most larger degree resistances are preceded by a zone of congestion. In WTI, this zone exists between 43.80 & 44.30. 

WTI shall have to provide an impulse break of this region if it intends to exhibit continued bullishness. Inability to break this zone of congestion & the macro-level key resistance has the potential to trigger a correction back to the support area.

Original post to Members - 20 Aug 2020

Posted here - 23 Aug 2020

 

[WTI October Futures Update] Please note the change in contract from September to October and the updated key levels.

While the key levels have changed slightly on account of the new contract, there isn't much change in the overall micro-level technical pattern in WTI.

It has mostly been oscillating in a narrow range between the resistances & supports for the last several days. WTI hit the key resistance at 43.20-43.30 and has receded to the nearest key support at 41.30-41.60. 

As long as the support level holds, WTI has the license to attempt the resistance level multiple times. It shall, however, have to take out 43.30 & the next key resistance at 44.10-44.20 for continuing bullish traction at a macro-level.

Inability to surpass these resistances shall set up a retest of the key support at 41.30-41.60, a break of which shall target the next key support at 40.20-40.50.

Original post to Members - 11 Aug 2020

Posted here - 23 Aug 2020

[WTI September Futures Update] Not much has changed

In our previous update, before the NFP report on Friday, we had listed a couple of adjacent key supports around the 41 region which needed to hold & trigger a bounce in order to build a case for immediate bullishness in WTI. 

The support region has clearly triggered a healthy bounce. The calibrated key support is now at 41.00-41.10. 

Key resistances continue to remain at 43.55-43.75 followed by 44.40-44.65.

API inventory report later today may introduce volatility

 

Original post to Members - 06 Aug 2020

Posted here - 10 Aug 2020

[WTI September Futures Update] WTI did get close to the key support at 41.35-41.45 earlier today & bounced off it. 

In an event this support is challenged during NFP related volatility, there is also another adjacent key support at 40.72-40.95. One of these supports shall have to hold & trigger a bounce to build a case for immediate bullishness in WTI. 

Key resistances continue to remain at 43.55 followed by 44.40-44.65.

Original post to Members - 05 Aug 2020

Posted here - 10 Aug 2020

[WTI September Futures Update] In line with the previous update, WTI has hit the target at 42.50 & stalled at the next local resistance at 43.55.

At a micro-level, WTI has formed a new layer of key support at 41.35-41.45. As long as this holds, WTI has the potential to retest the local resistance, a break of which shall target the next key resistance at 44.40-44.65.

EIA inventory release in a few minutes may introduce volatility

Original post to Members - 03 Aug 2020

Posted here - 10 Aug 2020

[WTI September Futures Update] WTI has been in a complex pattern for several days now, simply whipsawing in narrow ranges. It shall need to hold above the key support at 38.70-38.80 if it intends to target the next key resistance at 42.40-42.50. 

Original post to Members - 28 July 2020

Posted here - 28 July 2020

[WTI September Futures Update] WTI has been operating in an extremely narrow range over the last few days, whipsawing between the support & resistance levels. Not much has changed at the micro-level. Summarizing the previous update & all the parameters again.

It is important for WTI to operate above the key support at 39.85-39.97 for continued bullishness. As you might have noticed, WTI has been meandering around the local support at 40.60, which has been triggering smaller degree bounces, all of last week. 

The key resistance continues to remain at 42.50. Only a break of this level shall provide traction towards the next key resistance at 43.50-43.60.

A sustained break below 39.85 shall require a re-evaluation of the micro-pattern.

Critical Key levels >> Key levels >> Local levels (in terms of strength)

FOMC event in the next 48-72 hours may bring volatility in Oil. Kindly operate with the best trading discipline during this window.

Original post to Members - 23 July 2020

Posted here - 26 July 2020

[WTI September Futures Update] The bullish continuation in WTI was disrupted by the massive inventory build that showed up in the API report yesterday. EIA in a few minutes may introduce volatility.

Technically, at a micro-level, WTI has formed a key support at 39.85-39.97. It is important for WTI to operate above this level for continued bullishness. A local support has also formed at 40.50-40.70.

WTI will now need to surpass the key resistance at 42.50 for traction towards the next target at 43.50-43.60.

A sustained break below 39.85 shall require a re-evaluation of the micro-pattern.

Original post to Members - 21 July 2020

Posted here - 26 July 2020

[WTI September Futures Update] Please note the change in contract from August to September

At a macro-level, WTI continues to remain in a bullish set up as long as it operates above the critical key support at 35.00-35.10. 

At a micro-level, WTI has been meandering around the key resistance at 41.46-41.55 for several trading sessions now & has failed to break this level multiple times. For continued bullishness, any smaller degree pullback in WTI will need to hold above the key supports at 38.05-38.15 or 37.30-37.50. 

An impulse break of the key resistance at 41.46-41.55 has the potential to target the next larger degree key resistance at 44.40-44.50.

API Inventory Report later today may bring volatility

 

 

Original post to Members - 11 July 2020

Posted here - 13 July 2020

[WTI August Futures Update] WTI has bounced off exactly from the lower bound of the key support near 38.60 as shared in the previous update (tagged). It is important for this support to hold for any immediate bullish scenarios. 

At a micro-level, WTI shall need to first surpass the key resistance at 41.05-41.15 to gather more traction towards the next key resistance at 42.05-42.45.

Inability to hold the key support at 38.54-38.60 (slightly calibrated) shall trigger a deeper correction and expose the next key support at 37.00-37.15.

Original post to Members - 10 July 2020

Posted here - 13 July 2020

[WTI August Futures Update] At a micro-level, 38.60-38.99 is now an important key support that needs to hold for any immediate bullishness towards the key resistance at 42.05-42.45. 

Inability to hold the key support at 38.60-38.99 shall trigger a deeper correction and expose the next key support at 37.00-37.15.

Original post to Members - 06 July 2020

Posted here - 13 July 2020

[WTI August Futures Update] At a macro-level, the critical key support continues to remain at 37.00-37.15. As long as WTI operates above this support, the bullish scenarios continue to remain alive. For better traction though, WTI shall have to surpass the key resistance at 42.05-42.45 in an impulse manner. This shall open the gates to 45-47 zone.

The nearest key support at the micro-level is at 39.05-39.10.

Original post to Members - 01 July 2020

Posted here - 07 July 2020

[WTI August Futures Update] The price action in WTI is a good example of how markets move using waves & key technical levels. Despite a bullish API followed by a bullish China Caixin report, the technical key resistance at 40.60 decided to hold its ground and provide a sizable correction. 

Important to remember that while fundamentals provide a broad direction, it is the technicals that determines the path & the range of a move.

Back to the update

At a macro-level, the key support continues to remain at 37.00-37.15. Above this, the next key support comes in at 38.10-38.20. A local support has also formed at 39.00-39.05.

As long as these hold, WTI has the license to continuously make attempts to break the key resistance at 40.60. In an event this resistance sees a sustained break, WTI shall target the next key resistance at 41.45-41.70.

Only an impulse break of 41.70 shall reinstate the larger degree bullish pattern in WTI and open the gates to 45-47 zone.
 

Original post to Members - 26 June 2020

Posted here - 28 June 2020

[WTI August Futures Update] WTI has made a marginal high very close to the key resistance at 39.10. Sometimes, a minor breach can happen because of stop loss runs near an important level  which can result in marginal highs. Based on this price action, we have slightly calibrated the key resistance to 39.30-39.40. 

WTI will need to provide an impulse break of this resistance to build further traction on the bounce from the key support at 37.00-37.40. Without this pre-requisite, the key support remains vulnerable for another test, a break of which may lead to deeper correction.

It is best to operate with shorter term positions near key levels (updated daily) until there is more clarity & confirmation on the larger degree patterns. Also, from a fundamental perspective, with US elections in about 16 weeks,  uncertainty around second wave & the COVID drug + vaccine, short duration trades with quick entry/exits should be the ideal trading strategy on hyper-volatile commodities.

Original post to Members - 24 June 2020

Posted here - 28 June 2020

[WTI August Futures Update] WTI has so far tested the key support at 37.00-37.40 thrice & successfully bounced off it. It is however important for WTI to break the key resistance at 38.90-39.10 to gather further traction. Without this pre-requisite, the key support remains vulnerable for another test, a break of which shall target the next nearby key support at 36.25-36.55 (slightly calibrated)

Also, from a fundamental perspective, with US elections in about 16 weeks,  uncertainty around second wave & the COVID drug + vaccine, short duration trades with quick entry/exits should be the ideal trading strategy on hyper-volatile commodities.

Original post to Members - 19 June 2020

Posted here - 23 June 2020

[WTI July Futures Update] Not much to add here. 

WTI has reversed exactly from the key resistance at 38.75-39.15 yesterday. Two attempts to take out the resistance have failed so far.  

The key support continues to remain at 34.40-34.70. EIA inventory report shall introduce algo volatility shortly.

Please note that Wave(ii) & Wave(iv) which are corrective in nature often see frequent whipsaws.

Original post to Members - 16 June 2020

Posted here - 18 June 2020

[WTI July Futures Update] The US Federal Reserve announcement (tagged) that it shall begin buying debts issued by individual corporations amid the Covid pandemic has provided a fillip & tail wind to many asset classes including WTI yesterday. 

Technically, the next key resistance which is at 37.45-37.60 has capped the upside so far. The key support continues to remain at 34.40-34.70.

 

Original post to Members - 11 June 2020

Posted here - 11 June 2020

 

[WTI July Futures Update] WTI is moving in line with the macro-analysis shared in the previous updates (tagged). 

Wave(i) seems to have completed at the key resistance at 40.5 and the larger degree retracement/correction in wave(ii) has clearly begun. 

At a micro-level, WTI seems to be targeting the key support at 34.70-34.90. 

Important to understand that WTI is now in a near-term bearish macro-trend. Best to operate/trade in the direction of the trend until there is sufficient confirmation that the correction is complete.

Original post to Members - 08 June 2020

Posted here - 11 June 2020

[WTI July Futures Update] OPEC+ event over the weekend, NFP volatility, Release of Saudi July OSPs & thin volumes during market open have all resulted in WTI spilling over to the 40+ zone. With volumes picking up, WTI has now receded to the 38.5 levels.

Technically, at a macro-level, WTI has formed a key support at 37.60-37.66. A sustained break of this level shall provide an initial indication/signal of a high (completion of wave(i)) & a beginning of a deeper retracement to 30-26 levels in wave(ii). 

Original post to Members - 03 June 2020

Posted here - 11 June 2020

[WTI July Futures Update] In one of the macro-level scenarios shared a few days back (tagged), we had mentioned that WTI shall head to the 37-39 zone before a larger degree retracement begins. WTI has now reached the lower bound of this zone. 

WTI may now encounter a zone of congestion in the 37-39 area. Any longs from lower levels should move/trail stop losses to protect substantial gains.

At a micro-level, in line with the previous update, WTI did hit the target key resistance at 36.89 a few hours back. It was meandering around it for several hours before the bullish API report (draw vs expected build) led to its breach. 

If this breach converts into a sustained break, the next key resistance is at 37.62-37.75 followed by a critical key resistance zone at 38.85-39.19.

The nearest key support is at 34.20.

Please note that OPEC+ meeting later this week (tentative) or next week (originally scheduled) may develop newer macro-scenarios based on fundamentals. Needless to repeat, OPEC+ often brings substantial volatility & whipsaws in oil prices. Kindly put your best foot forward on trading discipline & risk management during this window.

 

Original post to Members - 01 June 2020

Posted here - 11 June 2020

[WTI July Futures Update]  Volatility around Trump's China conference led to a short squeeze in Oil late Friday. 

Technically, WTI has formed a key support at 33.80-33.96. WTI shall need to hold above this support zone for further bullish continuation to the next key resistance at 35.92 followed by 36.89.

A sustained break of this support level shall expose the critical key support at 30.78.

Original post to Members - 27 May 2020

Posted here - 03 June 2020

[WTI July Futures Update] In the previous update, we had articulated the importance of the 34.66-35.10 zone not only as a key resistance but also as a signal/decision point between two macro-level scenarios (Big Picture). Kindly refer to the tagged update.

Three attempts to break the 34.66-35.10 key resistance zone have failed so far. 

32.48-32.56 (slightly calibrated) is now the immediate key support. A break below this level shall be an initial sign of an incoming deeper correction. A sustained break of the critical key support at 30.78 shall provide confirmation of a high.

That said, please keep in mind that until the supports break, WTI shall have the license to make multiple attempts at the key resistance zone.

Know your parameters and make a trading plan accordingly.

Original post to Members - 24 May 2020

Posted here - 03 June 2020

[WTI Update]  WTI was trading around 34.65 on its way to the key resistance at 35.00-35.10 when GDP & Hongkong related announcements from China disrupted the micro-pattern and resulted in a massive sell off earlier today. 

That said, the key support at 30.78 (provided in the previous update - tagged) stalled this precipitous fall & triggered a sharp bounce off it. 

WTI shall need to hold below the key resistance at 34.66-35.10 (slightly calibrated) for the case in favor of a local top. A deeper retracement shall then follow at the break of the key support at 30.78.

On the other hand, a sustained break of 35.10 shall open the gates to the 37-39 zone.

Original post to Members - 20 May 2020

Posted here - 03 June 2020

[WTI July Futures Update]  It is time to review & understand all the technical parameters & scenarios before the EIA report (later today) which shall again introduce volatility.

WTI has pulled back from the key resistance at 33.05 in line with the previous updates. Two attempts to break it have failed so far. That said, the retracement has been brief and has held well above the key support at 29.77 which provides WTI with the license to make more attempts. In an event this level is taken out, WTI has the potential to target the next key resistance at 35.00-35.20.

On the other hand, a break of the key support at 29.77 shall provide more traction to the correction wave to target the next key support at 26.78-26.96.

Know your parameters & plan accordingly.

 

Original post to Members - 18 May 2020

Posted here - 18 May 2020

[WTI July Futures Update] We have made minor changes to the critical key resistance (CKR) as the spreads between June & July contracts have been constantly changing closer to June expiry. WTI hit the CKR in June contract earlier today. Kindly note the below change that applies to July contract.

WTI is currently negotiating with the critical key resistance zone (CKR) at 32.50-33.05. If WTI decides to pullback from the CKR, the nearest key support is at 29.77 followed by 26.78-26.96.

Original post to Members - 15 May 2020

Posted here - 18 May 2020

[WTI July Futures Update] Please note the change in contract from June to July

The bullish traction continues in WTI with brief corrective retracements. The OPEC+ development is adding some fundamental tailwind to the price action.

WTI is currently probing the key resistance at 29.40-29.60. A sustained break of this level shall target the key resistances at 30.15 & 31.38. The next critical key resistance comes in at 32.99-33.34.

Again, for continued bullish traction, any corrective pullback needs to hold above the key support at 24.90-25.10. A sustained break below this level shall require a re-evaluation of the micro-pattern.

Original post to Members - 14 May 2020

Posted here - 18 May 2020

[WTI June (July) Futures Update] Please note that the July future levels are in parenthesis & in non-bolded text

The bullish pattern in WTI has hit all the targets including the one around 28.40. 

WTI is now entering a zone with two key resistances very close to each other at 28.80-28.95 (28.90-29.10) followed by 29.35-29.50 (29.40-29.70). This shall be an area of congestion for the bulls. Only a sustained break above these levels shall open the gates to the key levels in the 30-33 zone. We shall elaborate the micro-pattern in an event of a sustained break.

For continued bullish traction, any corrective pullback needs to hold above the key support at 24.70-24.90 (25.10-25.25). A break below this level shall require a re-evaluation of the micro-pattern.

Original post to Members - 14 May 2020

Posted here - 18 May 2020

[WTI June Futures Update] In line with the previous update (tagged), WTI is now approaching & probing the key resistance at 26.80. A sustained break of this level shall expose the next key resistance at 28.15-28.40.

Original post to Members - 11 May 2020

Posted here - 18 May 2020

[WTI June Futures Update] On the macro-scale, 20.4-20.6 remains the critical key support that is holding the current bullish set up in WTI. The key support is at 21.80-22.20.

On the micro-scale, another new layer of key support has formed at 22.90-23.10.

As long as these hold, a test of the key resistance at 26.80 remains on the table. A sustained break of 26.80 shall open the gates to the next key resistance at 28.15-28.40

Original post to Members - 04  May 2020

Posted here - 18 May 2020

[WTI June Futures Update] The break of the critical key resistance at 20.20-20.40 has been difficult so far. There were 3 attempts last week. A sustained break of this key level shall set up a test of the next key resistance at 21.80-21.90.

Nearby local supports are at 18.04 followed by 17.37.

Key support zone is at 16.30-16.60, a break of which shall expose the critical key support at 10.20

WTI is still in wave(iv), so frequent whipsaws will be common. Important to protect gains by using stop losses.

Again, any speculation around Trump's announcement or commentary from Saudi, Russia etc can result in over-reactions.

Critical Key levels >> Key levels >> Local levels (in terms of strength)

Original post to Members - 26  Apr 2020

Posted here - 18 May 2020

[WTI June Futures Update] Last week, WTI reversed exactly from the key resistance zone at 17.90-18.50 after three failed attempts to break through it providing excellent intraday/swing trade set ups multiple times.

WTI has now formed a new layer of key resistance at 15.20-15.40 which shall also assist the bears in defending any bounces. 

A key support has formed at 10.2-10.3 below which the critical key support at 4.90-5.25 shall be exposed. Local support is at 12.10-12.30.

Critical Key levels >> Key levels >> Local levels (in terms of strength)

Original post to Members - 17 Apr 2020

Posted here - 19 Apr 2020

 

[WTI May Futures Update] Nothing much to add to the previous update which was pretty clear on the direction & targets for WTI .

WTI continues to get hammered plunging to 18 year lows. The contango or May-June spread has now widened to $7+.

From a technical perspective, WTI has achieved the target at 18.54 & is now attempting to reach the next critical key support at 17.00-17.50. 

WTI May futures contract shall be expiring on 21st April. June contract is trading near 25 with a massive contango of $7. In contango, investors are willing to pay more for a commodity at some point in the future. Hence, future prices [June & beyond] have been trading significantly higher for many weeks. Most brokers have begun rolling over from May to June contract. We shall also begin to cover June futures contract from the next update.

Original post to Members - 15 Apr 2020

Posted here - 19 Apr 2020

[WTI May Futures Update] Technically, WTI continues to remain in a strong bearish trend with small corrective bounces or retracements. Needless to repeat, please operate only in the direction of the trend & do not trade against the trend.

 

WTI has hit the key support at 19.56 as mentioned in the previous update.

The key resistance is at 22.55-22.70 followed by 23.30-23.40. As long as these hold, WTI has the potential to target the next key support at 18.54 followed by 17.00-17.55.

Original post to Members - 13 Apr 2020

Posted here - 19 Apr 2020

[WTI May Futures Update] 

Fundamentals

Market has seen a muted open after the last minute OPEC+ deal yesterday. Traders seem to be waiting for the official selling price [OSP] from Saudi Aramco to get a final confirmation that the price war has indeed come to an end. Keep in mind, it was the deeply discounted OSPs last month that had led to the precipitous drop in oil prices. Higher OSP will indicate a clear intent to support to the oil prices at least in the immediate term. 

Saudi is expected to announce OSP in the next 12 hours. Expect significant volatility around this event.

That said, demand destruction remains the gorilla in the room. Until the COVID issue is addressed, any short term bounces in oil will continue to get defended by the bears.

Technicals

A break below 21.10 shall open the gates again to the critical key support at 17.50.

Original post to Members - 12 Apr 2020

Posted here - 19 Apr 2020

[OPEC+ Mexico Standoff]

Mexico is reluctant to cut beyond 100kbpd vis-a-vis 400kbpd allocated to it by OPEC+ for two reasons.

 

1] Mexico producer PEMEX has hedged 234kbpd at $49. More importantly, Mexico government has bought $1 billion worth of put options as a part of its multi-year oil deal that almost works as an insurance policy against lower oil prices. The hedge has shielded Mexico in every downturn over the last 20 years. It made $5.1 billion when prices crashed in 2009 during the global financial crisis, and it received $6.4 billion in 2015 and another $2.7 billion in 2016 after Saudi Arabia waged another price war.

2] Mexico is able to divert a part of its lost exports [due to COVID] to its own domestic refineries to address its shortage of gasoline.

While 400kbpd is only a small part of the total planned 10mbpd cut and can be easily redistributed among OPEC+ countries, Saudi & Russia do not want to set a wrong precedent by agreeing to Mexico's demands which may instigate other smaller members to withdraw from OPEC+ agreement & renegotiate their respective production cut deals.

Original post to Members - 05 Apr 2020

Posted here - 05 Apr 2020

[WTI May Futures Update] 

Fundamentals
 

In the world of business, CO-OPETITION [not competition] is a form of business strategy. Co-opetition is simultaneous co-operation & competition OR concurrent war & peace. One of the objectives of co-opetition is to maintain the existing monopoly by dividing up the pie mostly among two market players to restrict the domination of the third.

Take the example of Coca-cola & Pepsi. While the world perceives them as fierce competitors, they are actually in co-opetition cartel maintaining their respective market shares, helping rather than hurting each other & ensuring that no other cola brand is able to break their long term co-opetative monopoly. There are many such co-opetition cartel examples in every industry.

Saudi needs $80+ oil to balance its budget. Russia needs it at $40+ & has better foreign currency reserves to weather economic shocks from lower oil prices. USA has its sweet spot between $30-$40 to balance both oil producers and, more importantly, its consumers. President Trump would be concerned about what consumers pay at the gas station in a COVID-19 impacted election year. Believe it or not, commodities such as oil & onions have immense potential to swing votes in a democracy.

Like the Coke-Pepsi example, Saudi & Russia have been in a co-opetition cartel keeping OPEC+ monopoly intact for several years. This had helped them control the oil prices as desired & benefit from windfall gains especially when oil prices had spiked to $70-$100+ levels.

With the entry of a third participant, the US [more actively from 2007], through an innovative technology called "Fracking", which is fracturing rocks to extract more oil & gas [also called shale oil/gas], this co-opetition cartel of Saudi & Russia has been under constant threat. US has been always opposed to any cartelization or collusion to fix prices and hence is incompatible with the concept of OPEC+ & finds it illegitimate. 

For Saudi & Russia, one way to challenge the US threat was to generate a painful price war for a short period where the oil price would be driven down to an abyss [extremely low]. This shall compel the US shale producers to begin shut ins & subsequently result in bankruptcies. While, both Russia & Saudi may suffer significant pain for a short period of time owing to lower oil prices, the future restoration of the co-opetition cartel shall benefit them in the longer term.

In an election year, Trump is walking a tight rope and has to find a fine balance between US oil industry which employs millions of workers [~9 mil] & the consumers who will have an eye on the fuel prices at the gas station.

 

To top all of the above variables, the COVID-19 demand destruction could swell to 25/30 mbpd in a few weeks. Cutting 10/15 mbpd pro-actively through global co-ordination or through production shut ins may not be enough & may only provide a very brief respite but not a sustainable solution to the oil price conundrum.

The price war saga is about to get more complex & interesting next week introducing fundamentals that will frequently generate turbulence. So, PLEASE FASTEN YOUR "TECHNICAL" SEAT BELTS.

Technicals

Last week's price action was an ideal example of how WTI prices follow the technicals to the exact key fibonacci levels & wave patterns even in times of hyper-volatility. 

We had shared 23.4 as the key support & WTI bounced off this level twice to target the 28.60-29.90 congestion zone which has multiple resistances. Next we mentioned that the congestion zone may trigger a correction & take WTI to 26.3-26.5 key support. WTI corrected exactly to the 26.5 level & bounced off again to the 28.60-29.90 key resistance zone.

It is best to follow the technical levels to execute "low risk high probability" opportunities as it consolidates all the fundamentals. 

We will share the next technical update after market opens & volumes pick up

 

Original post - 03 Apr 2020

Posted here - 05 Apr 2020

[WTI May Futures Update] In line with the previous update, WTI hit the key support zone at 23.45 and bounced off it twice in the last few hours. 

It is a good example of how waves & fibonacci mathematics play out even during hyper-volatility. While fundamentals provide direction, technicals provide the path, the depth & the range of a move. Both are equally important and they always go hand in hand.

23.45 is now a critical key support. 

WTI has the next key resistance at 29.90. However the zone between 28.60 to 29.90 is a congestion zone with multiple local resistances and a correction remains a possibility. The nearest key support zone that has formed is at 26.30-26.50.

On the fundamental front, OPEC+ remains a binary event just like the last one & any commentary from Saudi, Russia, US or OPEC+ countries shall convert quickly into price reactions including weekend gaps.

Original post - 02 Apr 2020

Posted here - 05 Apr 2020

[WTI May Futures Update] Oil spiked $5 within seconds on the back of Trump's statement to CNBC & the tweet that followed. It breached the key resistance zone at 26.89 mentioned in the previous update and receded from near it.

WTI has now formed a key support at 23.45. As long as this holds, it has the potential to retest the key resistance zone at 26.89-27.30 followed by 29.90.

Please note that the markets shall be extremely volatile with frequent whipsaws over the next few days as any commentary from US, Saudi or Russia will instigate sharp knee jerk reactions in oil markets. Kindly operate near key levels with stop losses. Also, protect & book gains frequently in a whipsawing environment.

Original post - 02 Apr 2020

Posted here - 05 Apr 2020

[WTI May Futures Update] Oil is at a point where any news/tweet by Saudi, Russia & US has the potential to generate an over-reaction.

From a technical stand point, we had mentioned in our previous update that 22.50-22.90 is a critical resistance zone. Clearly, WTI was negotiating with this zone earlier today. The price action approached the zone twice and was sent back both the times.

So far the resistance zone has held which means downside potential continues to remain. However, in an event this level sees a sustained break, WTI has the potential to extend its advance to the next key resistance at 26.89.

Kindly operate near key levels with stop losses. Also, protect & book gains frequently in a whipsawing environment.

 

Original post -30 Mar 2020

Posted here - 05 Apr 2020

[WTI May Futures Update] WTI is now approaching MAJOR multi-year support areas and hence any reaction or reversal may be strong. Trading with aggressive positions without stop losses is strictly not advisable here.

On the macro-pattern, a break of critical key support at 20.70 has opened the gates to the next critical key support at 17.50. However, since WTI is now in a major support zone, even micro-level key supports shall have the potential to provide strong reactions. So, please operate cautiously in this region.

At a micro-level, WTI has key supports at 19.86 followed by 18.42. As you might have noticed, WTI has already bounced off 19.86 earlier today and is now attempting to hold it.

22.90 is now a critical key resistance.

Original post -25 Mar 2020

Posted here - 05 Apr 2020

[WTI May Futures Update] 

Remember the --WHOOSH-- decline in WTI last week from 27+ to 20.7, all of it, in a matter of few hours. That was wave(iii) in action. Now compare that to the current wave(iv) which is full of whipsaws and can be frustrating & dangerous to trade. That's just the nature of it. The rationale is below:

In a downtrend, wave(iii) is the wave of FEAR. When it ends, the bulls are devastated but also relieved that the market mayhem might have ended. With this perception, a small set of early buyers jump in. The bears, on the other hand, who are now driven by GREED are plotting another leg down. This tug of war between fear & greed gives birth to wave(iv) & the resulting whipsaws. This is what WTI is experiencing right now.

The only way to gain some control over wave(iv) is to operate near key levels with small positions & tight SLs and then book small gains at the next level before it makes its mind to whipsaw. Many professional traders prefer avoiding wave(iv)s completely.

Back to the Technicals

In the previous update, we had shared that WTI shall next target the key resistance at 25.51. WTI went through a deep nano-level correction all the way to 23 before making another attempt to probe 25.51 earlier today. 

WTI needs a sustained break of 25.51 to set up a test of the key resistance zone at 28.90-29.20 followed by 29.99-30.35. 

A key support zone has now formed at 22.7-23.10. Critical key support continues to remain at 20.7-20.96. Failure to break 25.51 decisively shall expose the support zones.

Please note that the markets shall be extremely volatile with frequent whipsaws over the next few days as any commentary from US, Saudi or Russia will instigate sharp knee jerk reactions in oil markets.

Bottom fishing, trading against the trend, weekend exposure, aggressive trading without stop losses, averaging losses, hedging without a plan are dangerous and best avoided. Kindly operate with the best trading discipline near key levels with small positions and tight stop losses during this window.

Original post -15th Mar 2020

Posted here - 15th Mar 2020

[WTI April Futures Update] 
 

In game theory mathematics, the "game of chicken" [also called snowdrift game] is modeled around two drivers both headed for a narrow single lane bridge from opposite directions. Both drivers avoid yielding out of pride for not wanting to look like a "chicken" ultimately leading to a fatal head-on collision.

Saudi & Russia are the two drivers in the above model creating a complex price war that is intended to push the oil prices to extremely low levels. This is what Saudi is seeking to cause maximum pain on Russians in quick time so that they come back to the OPEC+ negotiating table. 

However, Friday's late announcement by Trump indicating US purchasing cheap oil to fill the strategic oil reserve "right up to the top" pours cold water on the plans of Saudi. 

US has a Strategic Petroleum Reserve [SPR] maintained underground in Texas & Louisiana with a capacity of 727 million barrels. It is an emergency storage that could provide supply for ~ 5 months [at maximum withdrawal capacity].

As of March 2020, the SPR is already holding inventory of 635 million barrels [https://www.spr.doe.gov/dir/dir.html], which means it has an unfilled capacity of 727-635 = 92 million barrels.

If Trump were to implement his statement, US should be purchasing 92 million barrels of oil in an effort to prevent the continuing sell off in oil & also to bail out the domestic oil industry. 
 

The actual impact on oil prices shall now depend on the trajectory of the Saudi-Russia price war & the implementation of Trump's purchase plan, both of which are opposing fundamental levers. 
 

The situation shall also get more complex & volatile with the nature of suppliers [countries] supplying the 92 million barrels to the US. Keep in mind, many parts of Europe had an opportunity to buy Saudi's crude since last weekend at a significant discount. With Trump's announcement, they now have the potential to become resellers to the US rather than consumers themselves for a quick profit. The continuously developing fickle scenarios shall also make an impact on WTI-Brent spreads starting next week.
 

With so many major fundamental levers at play, it is best to allow price action to consolidate into clear technical micro-patterns which shall provide key levels for the next trading opportunities.
 

The 2 cents [tagged] should be the rule book at all times to operate in a super-volatile environment.

We shall share technical key levels & micro-patterns once markets open & volumes pick up.

 

[2 cents]

 

With markets making massive moves frequently, volatility continues to be treacherous. So, it is important to set appropriate expectations and plan trades with these simple rules:
 

1. Operate only near key or critical key levels with stop losses.
 

2. Position sizing with the 1% rule. Do not risk more than 1% of the trading equity per trade.
 

3. Do not feel tempted to trade every candle or wave. No one has ever made money by trading every penny the market has to offer. It shall only trigger emotions leading to over trading & revenge trading.
 

4. Never average losses. Learn to embrace small SLs rather than averaging losses. Putting more good money into bad with a HOPE that bad money shall turn good some day is not a prudent trading strategy. It rarely works.
 

5. Bank small gains frequently as and when you can by continuously locking them by moving stop losses.
 

6. Avoid weekend exposure in a super-volatile environment.
 

There shall be plethora of opportunities with trains coming your way every few hours. Do not allow your mind to get influenced by Fear of Missing Out [FOMO] or peer pressure. Always live to fight another day.
 

80% of the battle in trading is won with discipline, patience & risk management. 
 

Success in trading is actually a lot of hard work & can be a slow grind. It requires 3Ps - Persistence, Perseverance & Patience. 
 
There is also a 4th. The most important P. 
 

PEACE OF MIND and this should be non-negotiable.

"Patience is not simply the ability to wait - it's how we behave while we're waiting" - J. Meyer.

 

 

Original post -12th Mar 2020

Posted here - 15th Mar 2020

[WTI April Futures Update] No change to the previous update

The only addition is that WTI has formed an intermediate support zone at 29.80-30.10, a break of which is needed to accelerate the decline to the critical key support at 26.86.

 

 

Original post -9th Mar 2020

Posted here - 9th Mar 2020

[WTI April Futures Update]  WTI has bounced off very close to the 26.86 critical key support earlier today.

 

WTI has now formed key resistances at 33.7 followed by 37.65. On the macro-pattern, the first critical key resistance comes in at 38.70.

 

As long as these hold, a retest of the critical key support at 26.86 remains on the cards.

 

Please note that the markets shall be extremely volatile with frequent whipsaws over the next few days as any commentary from Saudi/Russia will instigate sharp knee jerk reactions in oil markets.

 

Bottom fishing, weekend exposure, aggressive trading without stop losses, averaging losses, hedging without a plan are dangerous and best avoided. Kindly operate with the best trading discipline near key levels with small positions and tight stop losses during this window.

 

Original post -9th Mar 2020

Posted here - 9th Mar 2020

 

[WTI April Futures Update] 

 

The price war initiated by Saudi over the weekend has led to a 20% gap down in Oil. The next critical key supports are at 29.80-30.0 followed by 26.86.

 

37.65 is now a key resistance.

 

Please note that the markets shall be extremely volatile with frequent whipsaws over the next few days as any commentary from Saudi/Russia will instigate sharp knee jerk reactions in oil markets.

 

Bottom fishing, weekend exposure, aggressive trading without stop losses, averaging losses, hedging without a plan are dangerous and best avoided. Kindly operate with the best trading discipline near key levels with small positions and tight stop losses during this window.

 

 

Original post -8th Mar 2020

Posted here - 8th Mar 2020

 

 

[WTI April Futures Update]

Fundamentals

 

A few hours back, in response to the failure of the OPEC+ discussions, Saudi Arabia has begun a price war by significantly discounting its crude for its foreign markets in Asia, Europe & the US to lure refiners to buy Saudi crude rather than from other supplier countries. 

 

Sources suggest that Prince Abdulaziz bin Salman, Oil minister for Saudi, had issued an ultimatum to Alexander Novak[Russia] on Friday to collaborate on the joint OPEC+ production cut. Novak rejected the proposal and the talks collapsed.

 

Aramco has announced a discount of $8 for its Arab light crude to refiners in many parts of Europe. This will directly impact Russia's ability to sell its crude in Europe. Other producers/countries shall now be compelled to respond with similar discounts on their respective shipments which will aggravate the price war.

 

Additionally, Saudi is also considering increasing its production above 10 mbpd once the previous OPEC+ agreement expires at the end of March.

 

This clearly seems to be Saudi's strategy to force Russia back to the OPEC+ negotiating table and agree on its supply cuts proposal. But, until this happens, the price war shall create substantial downward pressure on oil prices.

 

Technicals

 

From a technical point of view, the critical key support at 39.18 shared in the previous update, is now exposed, a break of which can target the next critical key support at 37.50 followed by 35.20.

 

Key resistance is at 43.35 and a local resistance has formed at 41.6-41.85 zone. Local levels are weaker than key levels but can hold when the trend is extremely strong.

We shall share updated key technical levels and future micro-patterns as soon as the markets open.

 

Please note that the markets shall be extremely volatile with frequent whipsaws over the next few days as any commentary from Saudi/Russia will instigate sharp knee jerk reactions in oil markets.

 

Bottom fishing, weekend exposure, aggressive trading without stop losses, averaging losses, hedging without a plan are dangerous and best avoided. Kindly operate with the best trading discipline during this window.

Original post -2nd Mar 2020

Posted here - 4th Mar 2020

 

[WTI April Futures Update]
Fundamentals

Year       Event                WTI Low

1998   Asian Crisis              $10
2008   Great Recession      $33
2015   US Shale Boom       $26
2020   CoronaVirus             ???

Every time the oil markets have been impacted by a black swan event, OPEC+ has been compelled to respond with significant supply cuts. It is too early to label Coronavirus crisis as a black swan yet, but it certainly has the potential to convert into a pandemic if it is not controlled quickly.

Specific to the OPEC+ event on March 5/6, Saudi may decide to consider supply cuts in excess of 1 mbpd vis-a-vis 0.6 mbpd that was recommended by the OPEC+ JTC. That said, Russia, which is a non-OPEC member in OPEC+, shall have to agree to these cuts to keep the OPEC+ cooperation intact.

The challenge here is that while Russia is able to balance its budget at $40-$50 oil, Saudi needs $80+ oil to balance its budget. 

Businesses thrive on either good volumes OR healthy margins. With extremely low oil prices, healthy margins are completely ruled out. If volumes [supply] also get choked, how will Russian businesses sustain themselves ?

That is Russia's rationale to challenging frequent supply cuts by OPEC+, especially since Russia is able to reasonably balance their budget with $40-$50 oil.

The meeting on Thursday/Friday shall be crucial not only in terms of the quantum of supply cuts, but also the future cooperation relationship between Russia and OPEC.

A cut in excess of 1 mbpd can provide a temporary respite [lasting a few weeks] to the plummeting prices. The only sustainable solution to stabilize oil prices is to address the Coronavirus epidemic through a preventive vaccine and treatment which shall restore demand back to normal.

Technicals

In the last update, we had shared that WTI has a key support zone at 43.81-43.53. WTI hit both the upper & the lower range respectively & bounced off this support zone twice.

To make this bounce meaningful, WTI has its work cut out for itself with a number of difficult tasks. The first task is to surpass the key resistance zone at 49.1-49.4.

OPEC+ meeting in the next few days can result in whipsaws and large moves that has the potential to disrupt wave patterns and create alternate scenarios. Please operate strictly near key levels with small positions and tight SLs.

 

 

 

Original post -26 Feb 2020

Posted here - 27 Feb 2020

 

[WTI April Futures Update] WTI has hit the critical key support zone at 49.12-49.38. Kindly note that a sustained break of this level can expose multi-year lower levels at 47-45 zones.

Also, keep in mind that the OPEC+ meeting is only 5 trading days away, hence oil shall be in a hyper active mode with a potential for whipsaws over the next few trading sessions. Kindly operate with the highest trading discipline.  

 

 

Original post -24 Feb 2020

Posted here - 27 Feb 2020

[WTI April Futures Update] In our Friday update, we had mentioned that while bulls were making every effort to protect the key support at 52.64, any sustained break of this level shall accelerate the decline to 50-51 levels.

That's exactly what has played out so far.

52.56 is now a key resistance that will need to be surpassed for WTI to exit the current bearish downtrend. Until this key level holds, all bounces shall be defended.

50.66-50.73 is the key support zone, a break of which can target the critical key support zone at 49.12-49.38.

Needless to repeat, OPEC+ scenarios in the next few days can always disrupt wave patterns with whipsaws and large moves. So, it is important to operate strictly near key levels with small positions and tight SLs.

 

Original post -18 Feb 2020

Posted here - 27 Feb 2020

[WTI April Futures Update]  Please note the change in contract from March to April. The key levels have been calibrated accordingly.

Fundamentals

Russia keeps OPEC+ waiting on its official decision to support the 0.6 mbpd cuts recommended by the JTC. There is no announcement on the emergency meeting yet while the original OPEC+ meeting date of March 4/5 is fast approaching.

Overall, from a fundamental point of view, OPEC+ meeting is now a BINARY event with three potential scenarios.

Scenario 1:- Russia SUPPORTS 0.6 mbpd cuts - Oil may see some immediate upside. The upside may however be limited since the potential demand decline [due to coronavirus crisis] is much higher than the cuts proposed.

Scenario 2:- Saudi & Russia SURPRISE with additional cuts beyond the 0.6 mbpd proposed by the JTC. Oil may see substantial upside.

Scenario 3:- Russia decides to NOT SUPPORT the 0.6 mbpd cuts. This will push oil to test the multi-year lows in the early 40s.

Technicals

With the change in contract from March to April, please note the following adjustments in key levels.

The key resistance is now at 53.11 followed by 53.70. As long as the key resistances hold, there shall be downward pressure on the oil prices.

On the micro-pattern, a new layer of key support has formed at 50.81. Below this, the critical key support at 49.21 shall be exposed.

Please note that any official OPEC+ announcement on additional cuts or an advancement of the OPEC+ meeting to discuss cuts can bring significant impulse/knee-jerk reactions. Kindly operate with small positions near key technical levels with tight SLs.

Original post -07 Feb 2020

Posted here - 08 Feb 2020

[WTI March Futures Update] 

A quick note on the fundamentals.

 

The OPEC+ joint technical committee [JTC] has proposed a cut of 600,000 bpd until June 2020 [Q2]. Russia is still reluctant on this proposal. 

The next step shall be to discuss the technical proposal with all the OPEC+ members in a meeting that was previously planned on March 4/5, but shall be tentatively advanced to the second week of Feb. The official announcement for the new meeting date should come in shortly.

Prince Abdulaziz bin Salman who is the minister of energy, Saudi Arabia, frequently adopts a strategy of starting out miserly on supply cuts and then surprises the markets with a larger than expected cut on the last day of the OPEC+ meeting. While it may not happen every time, it is a behavioral pattern traders should be cognizant of.

No changes to the previous technicals. Please refer to the tagged below update for the same.

Original post -05 Feb 2020

Posted here - 06 Feb 2020

[WTI March Futures Update] 

The two fundamental developments around Coronavirus treatment research by a University in China and potential OPEC+ Joint Technical Committee deliberation on supply cuts have been preventing the fall and also supporting the oil prices in the last few hours. Important to note that such events are purely binary in nature and have the ability to generate temporary volatility in prices.

Technically, 48.75-49.05 is a critical key support and another key support is at 49.48. WTI has bounced off near these levels in light of the above two fundamental developments.

On the micro-pattern, for WTI to exit the super-bearish set up, it shall have to surpass the key resistance at 52.89-53.30. 

Zooming out, on the larger macro-pattern, WTI shall have to take out the critical key resistance at 54.85 to exit from the bearish set up.

So, in a nutshell, OPEC+ JTC shall have to make a material announcement if they intend to support the oil prices from here.

Please note that any official OPEC+ announcement on additional cuts or an advancement of the OPEC+ meeting to discuss large scale cuts can bring significant knee-jerk reactions. Kindly operate with small positions near key technical levels with tight SLs.

 

Original post -03 Feb 2020

Posted here - 05 Feb 2020

[WTI March Futures Update]

 

Fundamentals

OPEC+ is evaluating advancing the meeting from March to February on account of the precipitous fall in oil prices. Russia which is the most important non-OPEC partner in OPEC+ is supporting this view. Kindly note that any OPEC+ announcement in this regard can bring sizable knee-jerk reactions in the oil markets. So, it is important to operate ONLY near key levels with good risk management.

Technicals

In our previous update, we had mentioned that WTI has a critical key support at 51.82, a sustained break of which shall transition WTI from a bearish to a super-bearish set up. 

On the larger macro-pattern, WTI is now bordering on the super-bearish set up. The only way to avert this event, at least temporarily, is for WTI to break over the newly formed key resistance zone at 52.89-53.30.

As long as WTI remains below the key resistance zone at 52.89-53.30, it has the potential to test the key support zone at 49.78-49.91.

We have consistently maintained over the last many weeks that WTI remains in a bearish set up until proven otherwise. It also means that long trades in a bearish set up are best avoided until a meaningful confirmation of a long set up. "Sell on Rise" with tight SL near key resistance levels remains a good strategy. Counter-trend trades are best avoided.

Events such as US-Iran or OPEC+ meeting remains a potential fundamental risk on this opportunity. Kindly operate closer to the key levels with small positions and tight SLs

 

Original post - 24th Jan 2020

Posted here - 27th Jan 2020

 

[WTI March Futures Update]  

WTI has now formed a key resistance at 55.78. In an event, 54.30 sees a break the next key supports are at 53.66 followed by 52.98.

We have consistently maintained over the last many weeks that WTI remains in a bearish set up until proven otherwise. It also means that long trades in a bearish set up are best avoided until a meaningful confirmation of a long set up. "Sell on Rise" with tight SL near key resistance levels remains a good strategy. Counter-trend trades are best avoided.

 

 

Original post - 23rd Jan 2020

Posted here - 25th Jan 2020

 

[WTI March Futures Update] As anticipated and in line with the previous update, WTI has hit the key support at 55.44. If this region sees a sustained break, the extension key support is at 54.83. 

EIA crude inventory shall be released in ~ 2 hours and that shall keep WTI volatile. We shall share clear micro-patterns once the report is released and its volatility is out of the way.

Original post - 16th Jan 2020

Posted here - 18th Jan 2020

[WTI February Futures Update] 

In-line with the previous update, WTI hit the key support at 57.51 earlier today and has seen a technical bounce off it. 

WTI has now formed key resistances at 58.54 followed by 59.18. As long as these hold, WTI has the potential to retest the key support at 57.51, a break of which shall target the next key support at 55.90.

Fundamental events such as US-Iran escalation remains a potential risk on this opportunity. Kindly operate near key levels with small positions and tight SLs.

 

Original post - 14th Jan 2020

Posted here - 16th Jan 2020

 

[WTI February Futures Update] 

In our previous update, we had mentioned that 58.3-58.5 is a CRITICAL key support that shall be retested and that WTI shall enter a bearish set up if this critical key level is broken. This level did see a sustained break yesterday.

What is a bearish set up ?

A bearish set up DOES NOT MEAN that WTI will fall precipitously AS SOON AS the critical key support gets broken. 

What it means in technical language is that as long as a CRITICAL KEY RESISTANCE holds, the trend on WTI shall be down. 

What it means in trading language is that as long as a CRITICAL KEY RESISTANCE holds, the trading strategy on WTI should be to "SELL/SHORT on bounce."

Zooming out, on the larger macro-pattern, WTI has a CRITICAL KEY RESISTANCE at 60.38 and a key resistance at 59.58. As long as these resistances hold, WTI has the potential to target the key supports at 57.51 followed by 55.90. 

The above technical scenario is void above 60.38.

Events such as US-Iran escalation OR US/China Phase 1 trade deal [expected on Jan 15] remain a potential fundamental risk on this opportunity. Kindly operate near key levels with small positions and tight SLs.