FX:USOIL Crude Oil (WTI)
As I predicted, last night's build served again as a short-covering signal. We're seeing a lot of technical signals pointing towards the 32.50ish level. Keep an eye on this level. One of these signals is the neckline of a possible H&S formation. I'm still a major on oil , but don't currently have an open position. Short-covering is fully in force. As I mentioned last night, a technical rally is a welcomed move, making it more easily digestible to plumb to new lows. I plan to wait for the buying strength to fade with an eye towards re-entering a short position at the 32.50 level with a target at 28.25.
I thought it might take a bit longer, but I am poised to re-enter my short at the 32.50 level, looking for fulfillment of the H&S pattern. Given how far to the downside I believe the pattern predicts, my stop is likely going to be a bit higher at the 33.75 level. I'll re-asses this evening.
Very interesting piece on ZH re: Reuters' report of a massive $600mn liquidation in DWTI, the 3x inverse-levered oil ETN. In short, the piece claims yesterday's massive volume and price move in crude futures was likely a short-covering attempt to balance the books by the ETN's issuer, Credit Suisse. This further supports my argument that recent bearish API/EIA build reports are reliable short-covering signals, and should be headed. It also somewhat undermines the strength of yesterday's move as a signal the market is getting bullish in a hurry. Instead, it seems a fund decided to get less bearish, an important difference beyond mere semantics.