Oil - Possible 69-74 Ranging for NYMEX:CL1! by smitheric1970

I have been waiting for prices to break up into a 69.37-74.14 range and based on current prices action along with 2014 broken support levels, believe we may see extended sideways action in this range, for several weeks, if prices do indeed break upwards. With the Brent/Crude spread in excess of 4 dollars we are still favoring exports; along with potential Iran sanctions and heated geopolitics the aptitude for a higher Crude breakup is strong in my opinion.

On the chart I show 3 zones where I will be Shorting the Supply Zone , Buying Long the Demand Zone and taking either full or half profits in the Middle PRZ (Potential Reversal Zone):

1. Supply Zone 73.23-73.70
2. Middle PRZ 70.86-71.16
3. Demand Zone 68.90-69.37

I will be setting a BUY STOP at the 68.90 level to INITIATE this Long trade and will take half profits in the Middle PRZ. I will re-add those closed Long positions if price drops back to the Demand Zone . I will close all positions and enter Short in the Supply Zone and vice versa on the way down. NOTE: I do believe that prices will test a bit higher than the Supply Zone but think it will be short lived so a better Risk/Reward short entry at the top may initially be 74.00-74.50 but in lieu of historical price action I believe upper swings in this overall range are more apt to get sold in the Supply Zone. I will continue Selling the Supply Zone and Buying the Demand Zone until I see signs of a larger breakup or breakdown. If this range does indeed play out I am hoping that we see 8 or more weeks of price swings (See the May-July 2015 range and Dec 2016-March 2017 range).

Below I show price structure in this same range looking directly left; 2010 shows strong price action where I've marked the Supply Zone and Middle PRZ and 2014 shows a clear path for possible sideways 'fill in' for this entire range.

2010:

2014:

2014 H4 view:

I welcome all questions and comments, good trading all!

Comment:

For whatever it's worth, while I'm advising a Buy Stop at 68.90; this is purely due to price being in a high risk level for possible breakdown, as we have seen a couple of rejections at the 69.4 level. However full disclosure, I have been in and continue to hold long positions at our current price and am biased towards further breakup. Entering at current prices changes the R/R for this trade. I just wanted to advise all that I am currently Long CL; there is of course better reward, higher risk entering long at this level.

Trade active:

68.90 Buy Stop reached, added longs to my initial long play. Would like to see H4 close above 68.79; even better would be a new high daily close above 68.92:

Good trading all!

Comment:

Rough day to be long! Though... my view has not changed, I am still basing this off of current and 2014 price structure. If prices see a bounce tomorrow then we'll have a wedge pattern, the apex of which makes sense consolidating around 2014 levels. Below we have 2 zones in 2014; and yesterday we dropped down to test support in the lower zone, a potential wedge projection both directions and the circled cluster just warns of a potential bounce following today's drop (compare to lower circled cluster)

Comment:

Still playing the waiting game; but... Prices have moved back into the 'upper' 2014 trading zone and have broken the wedge top; we'll have to wait and see if prices break up or if the wedge is just widening. On a break up I have the current wedge projection at 71.3.

Good trading all!

Comment:

Prices finally broke out of the daily wedge pattern!

Based on 2014 levels, I expect that prices will 'initially' struggle to break the 71.75'ish level and that short term, prices will flag/consolidate between 70.26-71.75.

Regarding the trading levels: As shown on the chart, I will close half of my positions at 71.16 and will not close all Long positions until prices reach 73.23.

Based on the potential consolidation mentioned above (as I believe this consolidation will be a short term bull flag), if we do see prices initially fall from the 71.75 level, I will likely increase my Long Risk and re-add some long positions at 70.26-70.56.

This shows my hopes for next price movement:

Good trading all!

Comment:

Official song for this weeks trading and breakout is Charlie Brown's "The Kite"

Comment:

Fairly strong selloff end of day; however looking directly left at 2014 structure and at the broken supply level from the past few weeks, prices are likely just testing what is now higher support:

And a follow up on this chart where I'm looking for prices to create higher support at the 70.26-70.56 level = hoping for a flag below that zone creating a nice structure for future support.

Good trading all!

Comment:

What a brutal, brutal whipsaw yesterday. Wow! That was painful. That being said, my view has not changed; it was an unfortunate swing for many traders that were long and later those that switched to short; but, my view has not changed. Today's volume is very similar to that of the original OPEC agreement and high volume candle on 11/30/2016 following OPEC's original agreement to cut. Following that day, we saw a 5-6 dollar rally and then a topping process (extended distribution range) play out for 2-3 months. That is exactly what i am hoping for. 2-3 months of swings in the 69-74 range. If this happens then hopefully the Supply/Demand outline in the published chart will help cash in on some volatile sideways action. As well, we did get a retest of the broken supply/wedge line:

Comment:

This chart shows the day of the original OPEC agreement, 1.3 million volume, subsequent rally and topping process:

Comment:

Today we saw 1.21 million in volume and this chart shows the rally and topping process I'm hoping for (copy of the bars pattern is purely hypothetical of course):

Comment:

71.16 reached, I have closed half of my long positions; as mentioned above, if prices reach 71.70 and then retrace back to 70.56 I will re-add those long positions. Otherwise I will close all long positions in the Supply Zone between 73.23 and 73.67 and start a Short model.

Good trading all!

Comment:

No changes for tomorrow; it was nice seeing the daily wedge projection on the chart above reached at 71.30; again, if we see a pullback from 71.70 to 70.56 I will re-add the long positions that were closed at 71.16; however am starting to doubt that we will see that. Prices remain strong and the Brent/WTI spread is near 6 dollars which still bodes well for prices. I am still planning on taking full profits on remaining Long positions at 73.23-73.67 and will switch to a short model as well in that zone. Short term, I have my sights on 72.75 based on 2007 levels which continue to look very similar to 2018 price structure.

Good trading all!

Comment:

*****Added Long 70.56
Well we did indeed get the retrace from 71.7x back to 70.56. The half Long position that I closed at 71.16 yesterday, I just re-added Long at 70.56 and added a couple more Long positions to the initial entry size.

Comment:

Good trading all!

Comment:

No changes; Still running the Long model and as noted this morning, I re-added the previously closed long positions at 70.56 and built a bigger Long position on top of that, so far the consolidation in this zone is structuring nicely for hopefully another breakup.

Good trading all!

Comment:

Still looking to take full profits at 73.23 and begin entering short model, although I will be entering a Short model between 73.23-73.67 I believe there is risk up to 74.5.

Comment:

No changes to the plan, although we saw a drop late in the day on Friday, prices remain in the expected consolidation zone. If 70.26 breaks then I believe there is risk down to 69.37 but expect strong Demand around that level. We built in a little buffer with our half position closed at 71.16 and re-added (with extras) at 70.56 so still feeling good about this trade so long as prices manage to find some new legs this coming week. Still looking to close those longs at 73.23 and enter a short model. Lets see what Monday brings.

Good trading all!

Comment:

No changes, we are patiently waiting for this consolidation to break - hopefully to the upside. There is risk of course to the downside but I believe if that happens that we will see Demand at 69.37. To the upside I would anticipate a pause at the 72.75 level at which point we would move the green Demand zone up to 71.75-72.05 and anticipate more possible consolidation waiting for our Final TP. CL will be rolling over from June to July this week so, a decent move either up or down by end of the week would not surprise me.

Comment:

Prices attempting another breakup happening, no changes to my view, we may see some temporary consolidation in the next green zone up, currently I'm looking for prices to test the 72.64-72.93 zone; but again am waiting for 73.23 to take full profits and exit my Long Model. I will open short positions at 73.23, 73.53 and 73.83 looking for possible risk up to 74.5. Hoping, that we see a strong move up into Friday to exit Longs so that I can just roll out of my CLM8 Long contracts and into CLN8 short positions.

This shows that yesterday's close gave a bullish signal above the previous daily inflection and breakdown bar. I will expect this area (specifically 71.45-71.75) to remain as demand in the coming weeks so any short positions I will likely recommend taking profits higher than what is shown on the original published short (this will only be for the initial drop but more on that later)

Questions and comments are welcome!

Good trading all!

Comment:

Well, still no changes to the plan - oil's volatility is in full force; however, prices continue to grind up, see higher lows and yesterday's close showed the highest close in 3.5 years. Prices have again dipped below and then closed above the 71.40 Daily inflection shown in the chart above, and a daily close above this price is a bullish signal telling me that bulls are still in control; as when that Inflection was created, i view it as an interim Buying Climax.

And... although prices did not close above the 71.75 midpoint in this chart, there was a solid break above it prior to the pullback and the midpoint of this clone range is showing that it may Indeed be a midpoint of the price action to come as it was initially strong resistance and now appears to have strong hedging around it, which in my opinion means that the big money is hedging to the top and bottom of this range; I will expect the consolidation around 71.75 to continue prior to further breakup. Notice technically, the perfect test of the broken Supply Line:

And in the initial publish we have another bullish signal finally seeing a bounce/Demand at 71.16, which is the Middle PRZ of this chart:

So no changes, still looking to close all Long positions at 73.23 where I will also open a Short Model.

Good trading all!

Comment:

Well prices made new highs but remain very volatile; the spread in price between the front month and End of Year back months is over 2 dollars while the spread between the current front and back month is only 10 cents. This indicates that the market believes we are getting toppy and so we are seeing quick selling with all of the moves up. I believe that when previous strong inflections (Supply/Demand Exchanges) are broken, that large institutions hedge down to the next low inflection and up to the next high; currently I believe that 71.75 is the middle of a 69.37-74.12 range and where we initially saw strong resistance at 71.75, once prices broke above it, the strong hedging began and so believe the consolidation around (buying above and selling below) 71.75 will continue. So with that hedging, I believe we will see both 69.4 and near the upper end of 74.12. We will have to see which way the break happens first but as you know I am hoping for the upside first and also believe we may see this overall range for 2-3 months. This chart shows how I am continuing to build that case here for the upside break first, on the CLN8 July chart that we are rolling into on Tuesday; though the majority of trading volume is already there. We are continuing to see higher and higher Demand so unless we see a larger drop, I am still biased to the upside. My hopes are that we'll see a quick pop up to 72.62, but again, as prices continue to rise, I believe we will also continue to see this constant selling/profit taking with it creating a great deal of volatility making trading difficult and requiring patience for those like me holding positions and staggering. Staggering is great for this sideways action; let me know if you'd like more information on that.

Good trading all!

Comment:

No changes, just wanted to point out, although it's early in the day and on low volume - the bounce up out of this Demand Zone that recently exchanged from Supply. Here's an update on the chart that I posted following Friday's close:
Note: 71.75 is a critical level and if prices can manage to continue consolidating above the 71.75-72.04 zone then we should be in good shape for further move up this week to our 73.23 profit level.

Comment:

Still no changes - prices saw a nice breakup today as we are fully into the July CLN8 contract now. We may very well see some consolidation in the 71.75-72.9 zone but I am waiting for that 73.23 mark to take full profits and begin a short model; An update on the last chart, wow, we did see the quick pop up to that 72.62 mark I was hoping for, sometimes I get lucky...

Good trading all!

Comment:

The last update is posted below in the comments: addition: this is a more simple view of my short term outlook:

Order cancelled:

Wow what a drop in prices today; the market is absolutely liquidating; prices may head back above the Demand zone but this knife cut through my chart today so closing this out.

Until next time,

Good trading all!