TradeApe

Oil holiday range

FX:USOIL   Crude Oil (WTI)
359 0 5
So oil             has been ranging all throughout the holiday period. The wider range is from around 35.80 to 37.80, but price has remained within around 36.65 to 37.80 most of the time.

Fundamentally, nothing much has changed imo:

- Production is still strong and with several producer countries suffering economically at the moment (Saudi Arabia!!!), I can't see them cut production anytime soon...at least not by a lot. OPEC countries currently don't trust each other and Iran as a new producer will further increase supply of oil             .

- China just halted stock trading after 7% drop oil             a single day. They are one of the key oil             consumers, and if they're slowing down, overall demand will drop. This will of course also negatively impact economies outside China, further putting negative pressure on demand for oil             .

- An army of oil             tankers full of stored oil             will depress prices for months to come. Look at the utilisation rate of tankers used for oil             storage!!

In short, I'll eat my own left shoe if there is a sustained rally in oil             over coming months...the right shoe too if price moves above 60 before summer.

Technically, I'm simply going to watch key point of control levels while keeping the directional movement index of the daily, h4 and h1 in mind. Right now the bulls have gained a bit of strength over the holiday period, but it doesn't seem to reach Superman levels...bulls are still quite weak with the longer period directional movement index on the daily still solidly bearish . In the short term, I'm expecting a bit more ranging so watching key levels will be important. On the longer period H1 directional movement index , both D+ and D- are above 20 which suggests indecision (aka ranging) and on the shorter period one, the bears are now in control.

Wouldn't be surprised to see another stab at the lower range level (35.80ish) this week...maybe down to 35 again. Will have to reassess once we reach those levels and check momentum strength once we reach those levels. On the upside, I kinda see 40-41ish as temp tops even if we rally a bit from here.

In the medium term a drop to around 30-32 wouldn't surprise me all that much. Expecting a lot of ranging between 32 and 45 during the first half of the year and then maybe (!!!) an increase towards 55 for year end. Not if China completely topples over though.

Overall I'm still biased more short than long, but that doesn't mean I wouldn't take a shorter term trade from 35.80ish up to the upper range border around 200pips higher. If you enter at those key levels, you can keep initial stop losses quite tiny (10-20pips or so).
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