Thursday Forecast / Into Next weekNo we have Hit the daily FVG I am looking at the lows off
76.91
76.83
To be taken.
In conjunction with my other forecasts this week of being Daily bias Bearish!!
AXBQ2028 trade ideas
One more shove lower before blast off? The structure on Friday shifted into corrective looking waves, so I won't be surprised by another shove lower into fib support before the next meaningful run higher commences. If it goes up directly from here I will have some head scratching to do.
Event-Driven Strategy using WTI Weekly OptionsNYMEX: WTI Futures ( NYMEX:CL1! ) and WTI Weekly Options ( GETTEX:LO5 )
OPEC+, the coalition of the world’s leading oil producers, will convene on June 2nd to decide production policy for the second half of the year. The powerful oil cartel consists of 13 OPEC members and 9 nonmember participants, and together produces about 59% of global oil production. This amounted to 48 million barrels per day (mn b/d) in 2022, estimated by the US Energy Information Administration (EIA).
Many analysts expect OPEC+ to continue the voluntary cut of 2.2 mn b/d, due to expire at the end of June. This voluntary cut, introduced in November 2023, adds to 3.6 mn b/d of production cut that have reduced the members’ crude output by about 5.8 mn b/d, or about 5% of global supply, since November 2022. I consider the move an attempt to shore up prices against higher US oil production and an uncertain economic outlook in China.
OPEC+ meeting is a significant event in the global crude oil market. We could liken its importance to that of the Federal Reserve meetings for equities and bonds. The group’s decision could tilt the balance of supply and demand one way or the other.
Here are three possible outcomes:
• No change: To renew existing cuts of 2.2 mn b/d through the end of the year.
• Additional cuts. This would reduce global crude oil supply.
• Ease of cuts. This would release more oil to the global market.
The oil market may stay calm if the OPEC+ decision conforms to investor expectations of no change. A surprise announcement of additional cuts would likely send oil prices skyrocketing. But any pullback from current cuts could sink oil prices down.
This provides a good setting for event-driven trading strategies.
Monitoring Crude Oil Market Sentiment Real Time
For a trading strategy to work, the trader needs to understand the market sentiment ahead of the actual event. While analysts give out opinions, it is the investors who put money in their mouth. Therefore, for unbiased decision making, we should look into trading data.
The CME Group OPEC Watch Tool is a great analytical tool for crude oil traders. It uses NYMEX WTI crude oil option prices to calculate the probabilities of certain outcomes from the nearest weekly and monthly options that expire around the OPEC meeting. In essence, it uses actual trading data, and go the extra mile to transform it into useful insights. This valuable tool is free and can be accessed via CME Group website.
The title chart includes a snapshot of CME Group OPEC Watch Tool. As of May 26th:
• OPEC Watch Tool expects a 79.1% probability of no change;
• There is a 18.8% probability of ease of cuts:
• Additional cuts remain a remote probability, at 2.2%.
I would like to point out that the market often exhibits overly pessimistic or overly optimistic sentiment. OPEC Watch Tool shows the collective wisdom of crude oil options traders. However, the trades are not scientific forecast. Market sentiment could change very rapidly. With this in mind, we need to closely monitor it with real-time trading data.
If, through independent analysis, a trader establishes an opinion very different to what the market suggested, he or she may express it with a trade position and wait for the market to correct its faulty assumptions.
Trading with NYMEX WTI Weekly Options
We could consolidate the three possible OPEC+ decisions into two:
• Within Expectation. No changes.
• Exceeding Expectation. More cuts or less cuts.
Investors expect OPEC+ to maintain its current cuts. If that turns out to be the case, oil prices may not move much following the announcement.
If a trader hosts this view, how could he or she turn it into a trade strategy? The trader could consider selling short-dated out-of-the-money (OTM) WTI crude oil options.
The July WTI futures contract ($CLN4) settled at $77.80 a barrel last Friday. Selling OTC strikes on WTI weekly options would enable the trader to collect an upfront premium. The first Friday after the OPEC+ announcement is June 7th. The weekly options ($LO1M4) will last only 12 days before its expiration.
How do we select options strikes to sell? There are really no rules of thumbs. For illustration purposes, let us pick an OTC call strike approximately $5 above current market price, and a put strike about $5 below.
• Last Friday, the 82.75 call strike settled at 17 cents. Each WTI weekly option contract has a notional value of 1,000 barrels. Therefore, the trader would collect $170 premium for selling 1 call.
• The $72.75 put strike settled at 29 cents. The trader would get $290 for selling 1 put.
• If the trader sells 1 call and 1 put, he or she could collect $460 for just 12 days.
Words of warning for options sellers:
• CME Group requires options sellers to deposit $6,001 margin for each July contract as the time of writing. Therefore, this strategy requires an investment of $12,002 for both call and put.
• If OPEC+ acts as expected and the oil market stays calm, the trader would get the margin deposit back when the options expire worthless.
• However, if oil prices move up above the call strike, the trader could incur a loss, potentially wiping out all the margin deposit, and probably more.
• If oil prices drop below the put strike, the trader would also experience a loss.
If the trader holds an opposite view, he or she could buy the OTC call or put options, depending on which direction the trader is leaning towards. For a small upfront premium, the trader could establish a position on crude oil, and potentially collect a big payout if OPEC+ changes heart.
For those who are uncertain of which way OPEC+ would go, but are convinced that they would change courses, traders could buy both OTC calls and OTC puts at the same time. This is an example of options strangle strategy.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CRUDE OIL (CLN2024, USOIL, WTI)... BEARISH!Bias is Bullish.
Daily TF shows 2 weeks of
consolidation supported by a Daily
+FVG. Friday finally saw a "BO" as price
traded through the swing high with
a close above it. Note that price is
now inside the a Daily -FVG.
Potential for a bearish reaction? Yes.
However, I believe it will be short term
if anything.
The 4H gives more detail.
One can see bullish structure in
place that will support a move higher,
potentially to to test 80.21.
Thank you for viewing!
Leave any questions or comments in the comment section.
I appreciate any feedback from my viewers!
Like and/or subscribe if you want more accurate analysis.
Thank you so much!
May profits be upon you.
Will oil plummet? Or is this chart primed for a reversal?Oil ended april as a first red month, in which case may id be looking for sell high, they kept price suppressed and didnt attempt to make any significant higher highs this month,
since there was no real place, except the start of may, to sell high, (and fundamentals somewhat driving my thesis) i would expect them to keep trapping volume down low for the frontside move of the week, and shift momentum to the upside later in the week ending as a first green month (closing the month above previous month close 81.15 (CL1!) - after attempting to continue going lower in a previous downtrend)
friday was a first green day, so mondays thesis would be to look for a buy low in any 1 of the 3 sessions.
past 3 weeks have been inside week for the most part, this is primed for a serious reversal.
May the markets be with you all!!
Navigating Crude Oil Volatility Around OPEC MeetingsOPEC is a unique organization whose decisions impact national sovereignty, energy security, and most directly on crude oil prices.
OPEC’s decisions have material influence on crude oil prices. All eyes on OPEC+ ministerial meeting taking place virtually now on June 2 (instead of an in-person meeting on June 1 as planned previously). OPEC is widely expected to roll over its production cuts until year-end to support prices until demand improves.
Supply-Demand balance will tilt in the second half of 2024 if OPEC decides to continue its production cuts as the global economy heads into a season of rising demand.
Source: CME Group OPEC+ Watch Tool as of markets on 27th May 2024
CME Group’s OPEC Watch Tool shows a 79.06% probability of the supply cuts remaining unchanged and an 18.79% likelihood of ease in cuts.
Negotiations within OPEC could be challenging as not all members are satisfied with production cuts.
Iraq's oil minister - Hayyan Abdul Ghani - said his country would not agree to another supply cut, as per Bloomberg . Iraq is OPEC's second-largest oil producer after Saudi Arabia.
Iraq and Kazakhstan's repeated breaches of their supply quotas have caused tension within the group. Promises from both countries to compensate for overproduction have not been kept.
Source: OPEC
OPEC+ has cut output by 5.86m bpd, approximately 5.7% of global demand as per Reuters .
The U.S. followed by China and India are the top three consumers of crude oil. US guzzles 20% with China consuming close to 16% of the world’s oil production.
China’s feeble demand has been a significant headwind and remains so despite its stimulus package.
CHINA'S TEPID DEMAND CONTINUES TO WEIGH ON OIL
China is the largest importer of crude oil and its second biggest consumer. Chinese demand for crude remains tepid.
Its economy is showing signs of recovery but remains uneven. Industrial output surpassed analyst expectations , growing by 6.7% YoY in April. Retail sales rose by 2.3% YoY well below analyst forecasts. Sluggish consumer demand impacts oil consumption. April oil imports fell 8.8% MoM to 44.7m tonnes.
In April, China's Manufacturing PMI rose to 51.4 from 51.1 in March, surpassing analyst expectations of 51.0. Services PMI slightly fell in April to 52.5 but remains in expansionary territory of >50.
Source: TradingView
Consumer Confidence Index rose to 89.1 but remains near record bottom levels. It is well below its average of 109.8 as Chinese consumers remain pessimistic due to persisting property crisis.
Source: TradingView
US SPR BEGINS REFILLING BUT WILL NOT MATERIALLY IMPACT OIL PRICES
The US government remains vigilant about gasoline prices in an election year. President Biden's energy advisor, Amos Hochstein, stated that the Strategic Petroleum Reserve (SPR) has enough stockpiles to address any supply concerns.
The Biden administration has been replenishing the SPR after having depleted it by 180 million barrels in 2022. US government bought back 32.3 million barrels at an average price of USD 76.98/barrel throughout 2023 and early 2024.
Having cancelled purchase of three million barrels due to elevated prices, it resumed refilling by looking to buy 3.3 million barrels earlier this month.
NAVIGATING OPEC DECISION IN JUNE
CME Group’s OPEC Watch Tool shows likelihood of different outcomes using WTI Crude Oil option prices. It assigns likelihood to each outcome based on nearest weekly & monthly options.
Probabilities for the June meeting is derived from the Jul 2024 monthly contract (LON4) and the closest active weekly option prices.
Source: CME Group
The market’s assessment of OPEC’s decision changes dynamically. Navigating a constantly shifting volatile landscape requires liquid instruments that are curated for duration risk. The CME WTI Weekly Options do precisely that.
It enables superior risk management to deftly manage short-term price fluctuations with reduced premiums due to short time-to-expiry. Traders can hedge against near-term price volatility stemming from OPEC meetings, EIA reports, geopolitical events, and weather shocks.
CME Group offers Monday, Wednesday, and Friday weekly options, each with four options available at the beginning of the month, in addition to monthly options. As each weekly option expires, new listings are introduced for the following week. These are settled into WTI Crude Oil futures.
HYPOTHETICAL TRADE SETUP
In the lead up to OPEC+ meeting, implied volatility of WTI prices is low but expected to expand closer to date.
Source: CME Group
Crude oil price action will remain muted if OPEC+ decides to extend its current voluntary cuts of 2.2 million bpd. Weekly options can help harvest near-term volatility to benefit from muted price moves using iron butterflies.
The iron butterfly is a limited reward and limited risk options strategy designed to reap gains during times of low-price volatility.
It involves four legs to the trade, namely, (1) One short ATM call option, (2) One short ATM put option, (3) One long out-of-the-money call option, and (4) One long out-of-the-money put option.
Optimal condition for executing iron butterfly is when implied volatility is high while underlying commodity price action is expected to be mild.
Based on 27/May market prices, the hypothetical trade set up using weekly crude oil options expiring on 3rd June 2024 involves (a) Selling 78 ATM Call, (b) Selling 78 Put, (c) Buying 80 Call, and (d) Buying 76 Put.
Source: CME QuikStrike
At expiry, if WTI June crude oil prices settles between USD 76.6 and USD 79.4, this trade would generate a gain of USD 1.4/barrel or USD 1,400/lot using CME WTI Crude Oil options as each lot represents one thousand barrels.
If crude oil prices rally above USD 79.4/barrel, this trade can rake up maximum loss of up to USD 0.87/barrel or USD 870/lot. If oil prices collapse below USD 76.6, then this trade will result in maximum loss of USD 0.87/barrel or USD 870/lot.
Ignoring transaction costs, the iron butterfly exhibits a reward-to-risk ratio of 1.61x with a maximum upside of USD 1,400/lot and maximum loss of USD 870/lot.
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
Weakness still on in Crudeoil chart..#CRUDEOIL
Weakness still on in Crudeoil chart...
Support area 5800-5750
Charts for Educational purposes only.
Not a Trading Recommendation.
Strictly follow risk reward and stop loss.
Thanks
V Trade Point
Crude**CrudeOil:**
The forecast is for the price to rise to the top of the channel and then reverse the trend and fall to the key level at 72.69.
Oil Daily Charts - Long Trade - Image
I'm looking to take a long here on oil, we have had a good pullback, and I believe we are still in a bullish phase, so I will take a long.
TP and SL are as per the image.
Crude Oil Tuesday ForecastI Have in Mind that we will be BEARISH bias mostly this week as we have Tapped into the Premium Daily FVG yesterday and rejected lower.
My two targets shown in the forecast are the arrows.
Daily PDL
Weekly SSL
Now it is important to realise that the market is moving in London and a straight sell into 0830 or 0930est wouldn't be the best move.
Waiting for a retracement and then finding your model to get into the market is what we all strive for and to do couple times a week as intra day traders if the market gives us the opportunity.
Lets see how this plays out !!!
Crude OilThis is not a trading signal, it is my own opinion, if you copy the trade is on your own risk.
Oil has broken the down trend channel , so far there is still move to the down side to retest the previous support, which will probably create triple bottom to indicate for break through to the up trend if it breaks the sideways channel.
Friday retracement?? Forecasting.I am looking at crude to make a retracement today after couple days of down movement its been nice but can;t last forever.
So the arrows display where I think price will go today as a first target and second PDL
Keep it real simple on Fridays you got the weekend coming and you don't want to go into it with a loss or a win stay neutral.
Crude OilPair : US Oil
Description :
Completed " 12345 " Impulsive Waves
Break of Structure
Head and Shoulder
Bullish Channel as an Corrective Pattern in Short Time Frame
Demand Zone
Elliott Wave Analysis on Oil (CL) Looks for Short Term WeaknessShort Term Elliott Wave in Light Crude Oil (CL) suggests the decline from 4.12.2024 high is in progress as a 5 waves impulse. Down from 4.12.2024 high, wave 1 ended at 81.56 and wave 2 rally ended at 86.28. Wave 3 lower ended at 76.89. The 1 hour chart below shows the starting point from wave 3. Wave 4 bounce unfolded as an expanded Flat structure. Up from wave 3, wave ((a)) ended at 79.96 and wave ((b)) ended at 76.70. Wave ((c)) higher ended at 80.6 which completed wave 4 in higher degree.
Oil has turned lower in wave 5. Down from wave 4, wave (i) ended at 79.17 and wave (ii) ended at 79.85. Down from there, wave i ended at 78.08 and wave ii ended at 79.5. Expect wave iii to end soon, then it should see 2 more lows to end wave (v) of ((i)). Afterwards, it should rally in wave ((ii)) to correct cycle from 5.20.2024 high in 3, 7, or 11 swing before it resumes lower again. Near term, as far as pivot at 80.6 high stays intact, expect rally to fail in 3, 7, or 11 swing for further downside.
Long position opportunities Price has been in a range for couple weeks, just retraced to 61.8 bullish retracement headed to the top of the range. This is a low risk trade with make buying major coming in to the top of the range, I’ll take two positions and close one at the top of range and wait to see if price breaks above the range finally send position tp will be at 61.8 of bearish retracement of the last impulse. Will update trend line. The range is below 38.2 which is the resistance. If price fails with daily close may consider another short.
On another note Iran’s president passed and the reaction to price was minimal.
Crude**CrudeOil:**
The forecast for Crude this week is for the price to fall to the 76.43 level, that matches with a lost pivot.
Oil Counter-Trend Longs into Next ShortOil has broken the 15 minute shorts and now are on their way to the All The Way HWB shorts in on the larger 4 hour time frames. You can see how on Friday, the small time frame shorts survived multiple 4 hour candle dives below the 61.8% longs, only to close at or above the 61.8% long. Our 15 minute bias is long and expect it to trade back up to the 82.18-83.42 level, where we sold it in April. Where we can, we will try to be a buyer . . . should have bought those 15 min longs on Friday but it's a hard contract to hold over the weekend. . . .though if there is a direction to hold oil over the weekend, it would be long in the event of a geo-political issue that causes a gap up in oil prices.
Overnight trade on crudeQuick after market analysis for possible overnight trade
First trade Is a possible short at the newly formed resistance and I would have my Sl back up again the trend line downward
So entry would be 78.8
Sl would be 79.1
Tp would be 78.3
Here we could counting that when price reach the previous resistance it would have little to no volume to support more upward movements along side the fact that there 2 massive resistances against it.
Here we are counting on price coming back down to previous support where it would take out hopefully both of the 78.05 control of price by volume and if it takes out the 77.65 control of price too with a large wick we can have another long entry there and if price hits our Sl on the first over night trade short we can expect that it would have up and have a breakout past up the resistance to try and hit the 79.8 control of price where we can enter again by waiting for a confirmation of price heading back down to hit the trend line again before bouncing off to 79.80 for a long trade to make back our losses.
All of these trades have a very much probable chances of working out so that is my plan here for tomorrow depending on how things work out.
lets hope no unexpected dump or Pump happens to throw me off here
Three Factors Keeping Oil Prices in CheckAT A GLANCE:
Despite ongoing geopolitical conflict, oil prices and volatility are relatively low
A rise in U.S. crude production and weak demand in China are helping oil inventories maintain average levels
Considering many factors like the Russia-Ukraine war, OPEC+ cutting production by 3.6 million barrels per day and conflict in the Middle East, many traders might be surprised to find out that oil prices are only around $82 per barrel and that implied volatility on crude options are trading at relatively low levels below 40%.
Inventories Remain at Average Levels
So why are crude oil prices not higher and more volatile? Part of the answer lies in inventories. Crude and product inventories are right around their seasonally adjusted averages for the past five years. This suggests that at least some cushion exists in the event of a supply disruption.
Given that oil production is about 3.5% lower globally than it would have been without OPEC+ production cuts, how is it possible that oil inventories are still at average levels? There are two reasons. First, a boom in U.S. production has replaced about one third of what OPEC cut.
The second reason is weak demand. China buys about 10 million barrels per day in the international markets, and its economy has been growing much more slowly than it was a few years ago. Slow growth in China often hits oil prices with a lag of about 12 months and may be among the factors preventing a further rise in global crude prices.
Higher Prices Expected?
That said, traders are displaying some signs of nervousness. The skew on CME Group’s WTI CVOL index is quite positive at the moment, suggesting that some traders are buying out of the money call options to protect themselves from the possibility of much higher prices.
If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
By Erik Norland, Executive Director and Senior Economist, CME Group
*CME Group futures are not suitable for all investors and involve the risk of loss. Copyright © 2023 CME Group Inc.
**All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
Crude - Testing the waters...We saw our weekly target hit yesterday,
I have a hunch as on the Daily we are constantly going back to the middle of the range that bsl of some form is in the eye of the market before we would want to move down.
I ask myself.... Why would we want to go all the way back (weekly ssl level) if we have been here and raided Sell Stops... If I was the market I would want some breakfast first before I head down for lunch and dinner right?
So for PRE 0930EST im watching to see if price respects the 4hr FVG's.
This will indicate some bsl to be taken.
WTI trading plan - 16 May 2024NYMEX:CL1!
Longer term trend is still bearish. But Price is trading above 50 SMA, suggesting a short-term bullishness.
Will attempt for intra-day longs today with stops below the 50 SMA.
