Oil - Possible Sideways Range for NYMEX:CL1! by smitheric1970

Following an extreme drop from the 53 level and clear demand in the 43-46 area, along with a weakening DX yet likely rate hikes later this year, ongoing oversupply, yet continued promises form OPEC to meet the agreed upon cuts, I just do not see a catalyst midterm for a break up or down form the current range. 45.62-50.37 is a range created in '09, a swap zone created between harsh supply during the economic crisis and demand following the initiation and strengthening of QE in '09. This range has been somewhat of a median range for the past couple of years as longer term supply/demand is being realized.

Anyhoo.... I believe the main meat of the coming range will be roughly the .25-.75 levels of this range. This is not a specific trading plan, just a hypothetical scenario for sideways ranging with supply kicking in around 49 and demand around 47, please see the chart for specifics. Upthrusts towards the top of the overall range near 50.4 would not surprise me. If... this comes to fruition and prices see a couple of full swings int the range, 47-49 offer 200 ticks, and 2 full swings in the range would offer 800 ticks. It's possible that none of this plays out but again, I just do not see a catalyst short term for a larger break up or down.

If this range plays out, 4-8 weeks would not surprise me.

The stagger marks: if playing multiple positions, a portion are held from supply when shorting for the entire range and a portion for staggering are bought and resold at each line if it offers a pullback and vice versa for demand on the way back up. A simpler stagger method would be to just close half positions at the 48 level in either direction or to just pick your best risk/reward in either the supply or demand zone and trade the entire range.

Hopefully this made sense, if not, all questions and comments are welcome.

I wil add a couple chart over the next few days to show where the original 45.6-50.36 range was created in '09 as well as a Sept-Nov 2015 range that I think prices are ranging in the upper half of (43.85-49.55; I am specifically looking at the 47.04-49.55 portion of that range)

Good trading all!

Comment:

Looks like the supply zone may have finally taken over; still holding short the position trade, still staggering the .3 marks; Friday was a great day for staggering below the supply zone, bought in 4 levels and sold back 3 below 49.18. We may see a similar move on Mon/Tues. I will look to switch back to long model 46.51-47.11

Comment:

Note: if you are staggering, click 'make this chart mine' and switch to a 30 min view, there was much more buying and selling through levels then what the 4 hr chart shows.

Comment:

Averaged out of my shorts at 47.4 and started a long model between 47.1 and 47.4 but will be back in a short model if prices reach 47.7. I still expect selling between 47.7 and 48.3 but will re-enter the long model again looking for buying in the demand zone

Comment:

As prices reached 47.7 yesterday, I am back in a short model and still expect selling between 47.7 and 48.3; prices may have a tough time breaching 48, pending a very bullish EIA report. 48 level stagger sells set a couple cents below 48.

Comment:

So far, switching back to a short model at 47.7 and setting the 48 sells a couple of cents below 48 has paid off as we've seen high volume selling from 47.99. Staggers are back in action with a break below 47.4. Still targeting back down into the demand zone; would really like to see the 46.51-46.81 zone hit.

Comment:

Two items to note on this chart:

1. I look at the lower portion of the range 45.62-46.51 in the same manner as the top, this is a possible spring zone; if prices drop below the demand zone, I expect that they will spring back up into demand.

2. I am currently shorting the Septeber contract, when I re-initiate the long model it will be in the October contract

Comment:

Back in a long model at 47.11 on CLV7 (October), averaging in lightly and will average in heavier long on the October contract if prices drop between 46.5-46.81 again, staggering a portion at ever line.

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As stated above I am in a long model again buying contracts in the 47.1 to 46.51 demand zone on CLV7 and will look for a rally after rollover, potentially back to the 49.18 level: This is the same range and stagger levels on an October chart )CLV7); Assuming we see a reversal near the .786 retrace and overall keeping an eye on the short term supply/demand line which seem to be forming a symmetrical wedge. The pink lines show rollover and a 2 week cycle out to Sept 6.

Comment:

Update: great rally today! Staggered out and am currently back in a light short model; will short heavier into the model when/if the Supply zone is hit at 48.89. Here is the current view of the CLV7 chart that prices will be rolling into on Monday.

Comment:

On the CLV7 chart above, note the lower circle; it is showing a price structure that prices tried to break above but failed. I would expect selling at this level; which is in line with the bottom of the Supply zone at 48.88; (that structure failed at 49.93)

Comment:

My apologies, I stated above that rollover is Monday, I believe last day of rollover is actually Tuesday the 22cd, someone please correct me if i'm wrong. Friday was quite a move up, but no different than the previous few days down. Again, I am in a light short model currently at 48.6, will be in a heavier short model between 48.88 and 49.18. Another quick swing down to 47.50 would not surprise me. Have a great weekend all!

Comment:

Just wanted to update/re-iterate, I am back in a strong short model in the October chart as prices are back in the supply zone:

Comment:

So far a nice drop from the supply zone on the October chart; consolidation around 48 continues. I am still in a heavy short model and will start averaging down into a lighter short model (though as per the method will continuing re-adding shorts at every stagger level on a move up) at 47.4 and 47.5 but will remain in a short model until 47.11 is reached. Back in long model between 47.11 and 46.51

Comment:

Prices are back in the demand zone and I am back in a heavy long model. It is a bit risky being back in a short model following the high volume drop and risky to expect another move up; If I see a stronger breakdown I will manage it and post updates. A high volume break below 46.51 would require risk management and staggering out of the long positions.

Comment:

No changes, we are in a heavy long model as of 47.11 and looking for the supply zone again, 48.88-49.48. I've added in a few short term trendlines for fun, these are not for trading, only hypotheticals heading into Wednesday the 30th EIA report, hoping for a bullish report. If you are staggering, play every line if your capital allows for it, I have made more ticks in staggering partial position then I have in the overall position range during this sideways movement and I think it's possible that we have another 3-4 weeks of it, though possibly again on the higher end of the chart, an idea that I will show next

Comment:

In the last comment I mentioned the possibility of another 3-4 weeks of ranging, possibly on the upper levels of the chart again. As I have been expecting possible extended sideways movement I've been watching the May/June 2015 extended range; it ran a 3-4 dollar distribution range for 2 full months. Structurally, we currently have a very similar setup. Again, no changes to the trading model above, this is just a structural comparison to watch as we wait for an eventual breakdown.

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I advise no changes to the model above; just note that if you are staggering and/or selling at the supply zone, we may see mose tight sideways above the initial selling level of 48.88.

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Here is a similar view as the potential May/June 2015 repeat, but on CLV7, the October chart: Slide....

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Well the short term trend lines didn't play out very well, but again, they are more for hypotheticals not for placing trades. There are no changes as of yet to my last trade, although prices dropped hard on Monday and even broke the H4 wedge that I've been watching on the October contract, prices are still in the demand zone, and I am still in a long model. I believe that if prices can move back above 47.28, it will be a bullish sign of strength, if prices close below 46.51then i will likely stagger back out of the long model. Unless EIA is bearish, I anticipate more sideways to come.

Comment:

Well, the sideways continues... we saw quite the drop this week, however the overall range bottom at 45.62 held and I am still trading the model, currently heavy long, expecting anywhere between 46.21 and 47.70 between Monday and the next EIA report on Wednesday after which I assume we'll start to see draw's kick in over the next few weeks following last weeks storm activity in Texas. As per the original model I'm looking for the 48.88-49.48 supply zone and will continue staggering at each level on the way up. Have a great weekend all!