Crude likely to break support 40.90 - Short WTI crude via PRBS

NYMEX:CL1!   Light Crude Oil Futures
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CL1! (WTI crude) is attempting to break support at 40.90 levels which is likely to show supply for the currency at this juncture several times in the past.

The formation of long legged doji is traced out at 41.90, soon after this, prices slipped below 10DMA.

It may drag to 37.75 if it manages to break below this level decisively. For now, we are bearish on this commodity and advisable to sell on every rally.

The selling indications are bolstering as there seems to be a factor called volumes fading away. Hence, we reckon the previous rallies were only due to short coverings and certainly not to be regarded as bullish trend unless it breaks above resistance levels.

RSI is showing bearish convergence to the prices drops (currently, RSI on weekly trending at 36.9897 while articulating).

While slow stochastic on daily charts approached oversold territory but there are no convincing hints of %K crossover (currently %D line at 16.7059 & %K line at 18.7128)

So overall we could foresee the retest of 37.75 as the most likely event if it fails to hold onto 40.90.

Hence, WTI crude Put Ratio Back Spreads are advisable to mitigate these downside risks.

Strategy goes this way, short ATM puts at spot levels with shorter expiries and simultaneously add longs in OTM puts with longer expiries for immediate targets at 37.75 with stop loss at 43 levels, thereby risk reward would be 1:2.

Caution: If you think the commodity price is going to crash further, you should be loading up on put buys in existing strategy. The total cost of the trade is going to be the difference between the prices of the two options.

Since the option you sell will always be lower on the skew curve it means you are getting a better deal on what you are selling compared to what you are buying.
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