RB - Potential for scalping a squeezePotential to catch a scalp with possible squeeze momentum after BO of sustained bear trend,
Would need significantly more bars with good bulllish momentum to consider long.
THUX2024 trade ideas
Analysis of 3 to 6 months of gasolineThe price of gasoline reached its ceiling at 4,000, and with the correction of the price, it has now reached 2.49 From my point of view, this can be a price correction in the long-term analysis, and the price of gasoline will reach the range of 3 targets in the long term. As I specified in the analysis of cash inflows, there are cash inflows in gasoline that have not yet reached their goals, and this can give credit to our pullback.
GASOLINE Short-term buy. Sell at the right time.Gasoline (RB1!) is on a 3-day bullish 1D candle run after testing and holding the 1D MA50 (blue trend-line) this week for the first time since February 05. On the wider scale, this is the Bullish Leg of the 18-month Channel Down and it is approaching its top (Lower Highs trend-line).
As you can see, the Bullish Legs of this pattern share a certain degree of symmetry, so as it happened on April 12 2023, we expect the new Lower High to be priced near the 1.236 Fibonacci extension. That will also touch the internal Higher Highs trend-line. The symmetrical 1D MACD Bullish Cross of March 27 2023, was a signal that the Bullish Leg will soon come to an end.
As a result, on the 1.236 Fib we will turn bearish and target the bottom of the (dotted) Channel Up at 2.6000.
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Cup and Handle Pattern in Gasoline!Next to Cocoa, Gasoline comes in 2nd place for the best total return performance in Q1 2024 amongst commodity markets. The infamous cup and handle pattern has emerged, adding a level of upside conviction in this trade.
Fundamentals:
Severe weather developments here in the USA and geopolitical supply chain disruption have caused refiner input costs to tick up slightly faster than normal. According to FactSet, the cost of gasoline shipments into New York Harbor next month has jumped 28% since the beginning of the year. This increase surpasses the average of 20% seen during the same period over the past quarter-century.
According to Bloomberg, "In Russia, an expanded Ukrainian drone campaign has hammered key refineries. The damage has required months-long repairs and pushed the Kremlin to conserve domestic supplies by curbing fuel exports."
Despite record U.S. production, these supply chain shocks have helped boost gasoline prices, thereby increasing refinery profits and margins for those companies that can remain operational. The next OPEC meeting is due on April 3rd, where further production cuts will act as another tailwind for higher crude and gasoline prices.
Technicals:
From a technical perspective, we can see a clear cup and handle pattern forming, which is typically a bullish chart pattern. We would need to see a break and close above $2.85 (the top of the August 15th gap lower) before testing the next major level of $2.95-$2.985. A break and close above this level is likely to lead to an upside breakout.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
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
*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.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Market maturity in wave 1 and 2! or sideways corrective patternDear analysts and traders,
I hope you are doing well and are motivated for the week ahead. I wish you all the success in your business endeavors. Remember that success in trading lies in consistently defining and sticking to your rules.
As someone interested in the Elliott Wave Principle, I find it to be an invaluable tool for market analysis. I have developed my approach by combining this principle with my personal experience and by considering different scenarios that are likely to occur in the market. It should be noted that I do not like to be surprised in the market, and that's why I have different market prospects. I follow them to be sure and recognize the structure that is forming so that I can 100% recognize it.
I will share my analysis with you, but please note that I am not providing any buy or sell signals. My perspective on idea analysis is completely unbiased, so if the idea analysis meets your standards, you can use it as a guide to make an informed decision.
I have attached my previous analysis of the same market so that you can compare and see the differences. All the details of my analysis are clearly labeled, making it easy for you to understand. However, having a basic familiarity with the Elliott Wave Principle theory will help you understand the analytical idea more easily.
I have been studying the Elliott Wave Principle for almost three years now, and over time, my understanding of this knowledge and experience has grown. What I have achieved so far is the legacy of a genius called Ralph Nelson Eliot, and I am really happy with my progress. May peace be upon him.
Thank you for your support so far. I will always remember your kindness. Please share your comments and criticisms with me.
I hope my analysis will be useful to you in your business journey, and I wish you all the best.
Sincerely,
Mr. Nobody
GASOLINE Sell signal approachingGasoline (RBOB1!) is staging a short-term rebound towards the top of the (dotted) Channel Up ahead of a 1D Golden Cross. The 18-month pattern is a Channel Down and last time we saw those technical dynamics was during the previous Bullish Wave/ Channel Up that peaked on the 1.236 Fibonacci extension (April 12 2023) exactly on the Golden Cross and then corrected below the (dotted) Channel Up.
As a result, we are starting to take a bearish stance on Gasoline, targeting 2.400 (bottom of the Channel Up).
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Corrective sideway structure?!!!Greetings
Dear analysts and traders,
I hope you are doing well and are motivated for the week ahead. I wish you all the success in your business endeavors. Remember that success in trading lies in consistently defining and sticking to your rules.
As someone interested in the Elliott Wave Principle, I find it to be an invaluable tool for market analysis. I have developed my approach by combining this principle with my personal experience and by considering different scenarios that are likely to occur in the market. It should be noted that I do not like to be surprised in the market, and that's why I have different market prospects. I follow them to be sure and recognize the structure that is forming so that I can 100% recognize it.
I will share my analysis with you, but please note that I am not providing any buy or sell signals. My perspective on idea analysis is completely unbiased, so if the idea analysis meets your standards, you can use it as a guide to make an informed decision.
I have attached my previous analysis of the same market so that you can compare and see the differences. All the details of my analysis are clearly labeled, making it easy for you to understand. However, having a basic familiarity with the Elliott Wave Principle theory will help you understand the analytical idea more easily.
I have been studying the Elliott Wave Principle for almost three years now, and over time, my understanding of this knowledge and experience has grown. What I have achieved so far is the legacy of a genius called Ralph Nelson Eliot, and I am really happy with my progress. May peace be upon him.
Thank you for your support so far. I will always remember your kindness. Please share your comments and criticisms with me.
I hope my analysis will be useful to you in your business journey, and I wish you all the best.
Sincerely,
Mr. Nobody
Buy March unleaded at 222.42 limit, if filled stop at: 215.20TV new trade. lookinng to buy unleaded gasoline on possible pullback. Buy March unleaded at 222.42 limit, if filled stop at: 215.20, tgt 237.80
Long Long Long LONGGGGGI labelled everything in the chart, its a good enough description.
Looking for MUCH higher prices, this has been an accumulation of a lifetime.
GASOLINE Buy signal if 1D MA50 breaks.Gasoline (RB1!) has had a strong 3-day rise last week but that is still contained within the bearish barriers of a Channel Down. However during this whole pattern, the 1D RSI has been developing a Channel Up, hence a Bullish Divergence for the price.
As a result, we will look to the 1D MA50 (blue trend-line) for a break-out signal and if the price closes a 1D candle above it, we will buy and target the 1D MA200 (orange trend-line) with an early target projection at 2.4250 (but of course this can move depending on its course).
Technically, we can even see the rise extending to +30.00% from the bottom or even slightly higher, as the two major bullish runs of 2023 have risen by +34.60% and +32.60% respectively.
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Gasoline Futures Fractals from 2000s Bull RunThe main assumption, that is unlikely to happen, assumes the coming wave will be proportional to the 2004-2008 rally. This is based off of the move out of 2020 being over 6 times the trough to peak percent gain during 2002-2003.
The lead in fractals and Bollinger Band behavior are similar. We are once again in an expansionary phase of real estate. General risk is arguably more elevated globally.
This cycle could be quicker, if money velocity increases massively. The liquidity providers are more than capable of doing this.
🔝 US Gas prices become more affordable as key breakdown is hereAmericans could breathe a sigh of relief with gas prices set to be more affordable this year.
US gas prices hit their highest 52 Weeks in August and September ahead of Labor Day, with the national average standing at $3.82 a gallon FRED:GASREGW , per AAA Gas Prices .
Gasoline prices hit summertime levels in over a decade even as the driving season comes to a halt, as a result of rising crude-oil prices TVC:USOIL driven by production cuts.
Brent crude TVC:UKOIL , the international benchmark, jumped to $90 a barrel earlier is September for the first time in 2023 after both Saudi Arabia and Russia extended oil production cuts of 1.3 million barrels a day through December 2023 in a bid to maintain price stability.
Higher US gas prices NYMEX:RB1! are a problem for the Federal Reserve, which has been trying to tame historically high inflation. The central bank has already hiked interest rates ECONOMICS:USINTR by more than 500 basis points since March 2022, helping lower the pace of consumer-price increases to 3.2% in July from last year's highs above 9%.
But the jump in fuel prices is threatening to derail the progress the Fed has made in taming inflation.
As a result, just after September, 2023 FOMC meeting market participants are waiting one or maybe two dovish Fed's Rate price actions in 2024. At the same time before September, 2023 Federal Reserve meeting, market expectations were about three cuts, near to four. (up to 100 b.p.).
Meanwhile juts a take a look what technical picture in RBOB Gasoline futures RB1! price says.
Near the middle of August, 2023 Gasoline futures prices turned massively down, due to seasonal backwardation in RBOB futures contracts, where autumn RBOB futures contracts are usually to be trade lower vs. summer RBOB futures contracts.
Moreover, in the last day of Q3'23 RBOB futures price turned firmly lower, breaking down the major trendline support that was actual all the time from disinflationary Covid-19 era. Moreover weekly SMA(52) is broken down also.
In a conclusion, I have to say that retail gasoline prices are usually to follow the major trend, within one or up to two months.
Will RBOB Gasoline Hold Support? RBOB has witnessed significant selling since its late August highs, with looming economic growth fears and potential consumer weakness at play. However, recent jobs data paints an encouraging near-term picture for RBOB.
Recent Economic Developments:
Last week’s figures from the Atlanta Fed GDP Now model for Q4 reported a growth rate of 1.2%, falling short of the expected 1.8%. Last week's JOLTs numbers for job openings were at 8.73 million, below the expected 9.3 million, and ADP Non-Farm Payrolls on December 6th registered 103k, lower than the anticipated 130k. Initially signaling a weakening labor market, these signs prompted expectations of interest rate cuts as early as March 2024. However, Friday's unemployment and nonfarm payrolls figures surprised to the upside, showing strength in job creation, pushing interest rate cuts back to May of 2024.
The Goldilocks Narrative:
The Goldilocks narrative for risk assets appears to be in play, with job openings possibly fewer, but job creation and high employment still evident. Michigan consumer sentiment reached its highest level since September, and 1-year and 5-year inflation expectations were lower. Both crude and gasoline act as coincident and forward-looking commodities. These recent figures suggest consumers are more optimistic about inflation and the economy's direction, indicating continued high gasoline demand.
Major Support:
Major support for RBOB is evident at $2.00-$2.08/gallon. A break and close below this level could lead to further liquidation. Conversely, the 21-Day EMA will serve as overhead resistance in the near term; a break and close above this level would be imperative for a potential reversal.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
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
*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.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Primer on Crude Oil Crack SpreadEver dreamt of being an oil refiner? Fret not. You can operate a virtual refinery using a combination of energy derivatives that replicates oil refiner returns.
Crude oil is the world’s most traded commodity. Oil consumption fuels the global economy. Crude is refined into gasoline and distillates.
Refining is the process of cracking crude into its usable by-products. Gross Processing Margin (GPM) guides refineries to modulate their output. Crack spread defines GPM in oil refining.
This primer provides an overview of factors affecting the crack spread. It delves into the mechanics of harnessing refining spread gains using CME suite of energy products.
UNPACKING THE CRACK SPREAD
Crack spread is the difference between price of outputs (gasoline & distillate prices) and the inputs (crude oil price). Cracking is an industry term pointing to breaking apart crude oil into its component products.
Portfolio managers can use CME energy futures to gain exposure to the GPM for US refiners. CME offers contracts that provide exposure to WTI Crude Oil ( CL ) as well as the most liquid refined product contracts namely NY Harbor ULSD ( HO ) and RBOB Gasoline ( RB ).
Crude Prices
Crude oil prices play a significant role in determining the crack spread. Refining profitability is directly impacted by crude oil price volatility which is influenced by geopolitics, supply-demand dynamics, and macroeconomic conditions.
Higher oil prices lead to a narrowing crack spread. Lower crude prices result in wider margins.
Expectedly, one leg of the crack spread comprises of crude oil.
Gasoline Prices
Gasoline is arguably the most important refined product of crude oil. Gasoline is not a direct byproduct of the distillation process. It is a blend of distilled products that provides the most consistent motor fuel.
Gasoline prices at the pump in the US vary by region. Price differs due to differences in state taxes, distance from supply sources, competition among gasoline retailers, operating costs in the region, and state-specific regulations.
CME’s RBOB Gasoline contract provides exposure to Reformulated Blendstock for Oxygenate Blending (RBOB). It is procured by local retailers, who blend in their own additives and sell the final product at pumps.
RBOB is blended with ethanol to create reformulated gasoline. It produces less smog than other blends. Consequently, it is mandated by about 30% of the US market. RBOB price is thus representative of US gasoline demand.
Each CME RBOB Gasoline contract provides exposure to 42,000 gallons. It is quoted in gallons instead of barrels. The contract size is equivalent to one thousand barrels like the crude oil contract.
Distillate Prices
Distillate or Heating Oil is another important refined product of crude oil. Distillate is used to make jet fuel and diesel. Demand for distillate products is distinct from gasoline demand.
A substantial portion of the North-East US lack adequate connection to natural gas. Hence, the region depends on HO for energy during winters making HO sensitive to weather.
CME NY Harbor ULSD contract ("ULSD”) provides exposure to 42,000 gallons of Ultra-low sulphur diesel which is a type of HO. ULSD contract is also equivalent to one thousand barrels.
Chart: ULSD Price Performance Over the Last Twenty Years.
TRADING THE CRACK SPREAD
The crack spread can be expressed using the above contracts in three distinct ways:
1) 1:1 SPREAD
This spread consists of a single contract of CL on one leg and a single contract of one of the refined products on the other. This spread helps traders to express their view on the relationship between single type of refined product against crude oil. It is useful when price of one of the refined products diverges from crude oil prices.
1:1 spread is also useful when there are distinct conditions affecting each of the refined products.
2) 3:2:1 SPREAD
This spread consists of (3 contracts of CL) on one leg and (2 contracts RBOB + 1 contract of ULSD) on the other leg. The entire position thus consists of six contracts. It assumes that three barrels of crude can be used to create two barrels of RBOB and one barrel of HO.
This trade is better at capturing the actual refining margin. It is commonly used by refiners to hedge their market exposure to crude and refined products.
3:2:1 spread is used by investors to express views on conditions affecting refineries.
3) 5:3:2 SPREAD
Spread consists of (5 contracts of CL) on one leg and (3 contracts of RBOB + 2 contracts of heating oil) on the other leg. This spread captures the actual proportions from the refining process. However, it is much more capital-intensive.
FACTORS IMPACTING CRACK SPREAD
Seasonality, supply-demand dynamics, and inventory levels collectively impact crack spreads.
Seasonality
Mint Finance covered seasonal factors affecting crude oil prices in a previous paper . In that paper, we described that crude seasonality is influenced by variation in refined products demand.
In summer, gasoline demand is higher, and, in the winter, distillate demand is higher.
Seasonal price performance of the three contracts is distinct leading to a unique seasonal variation in various crack spreads. Summary performance of the three spreads is provided below.
Chart: Seasonal price performance of Crude, its refined products, and their spread (excluding years 2008, 2009 and 2020 in which extreme price moves were observed)
Refiners strategically time their operations based on seasonal trends, ramping up refinery capacity ahead of peak demand in summer and winter. This involves building up inventories to meet anticipated high demand.
However, this preparation often results in a narrowed spread just before peak utilization. As the spread reaches its lowest point, refiners take capacity offline for maintenance.
Subsequently, crack margins begin to expand as refined product supplies dwindle, aligning with decreased crude oil consumption. This results in a gradually increasing spread through high consumption periods.
Supply/Inventories
Supply and inventories of crude oil and refined products influence crack spreads. When inventories of refined products remain elevated, their prices decline narrowing the spread.
When the production and inventory of crude oil is elevated, its price declines leading to a widening spread.
On the contrary, low inventories of refined products can lead to a wider crack spread and low inventories of crude oil leads to a narrower crack spread.
Demand
Refinery demand has a self-balancing effect as higher refining requires higher consumption of crude which acts to increase crude oil prices.
Demand for crude oil and refined products is broadly correlated. However, there are often periods when demand diverges on a short-term scale.
Economic activity and available supplies drive demand for refined products. During periods of high economic growth, refined product consumption is robust pushing their price higher.
Demand for refined products can precede or lag demand for crude oil from seasonal as well as trend-based factors. This lag can be identified using the crack spread. Sharp moves in crack spread pre-empt moves in the underlying which act to normalize the spread.
CURRENT CONDITIONS
There are two trends defining the crack spread currently:
1) Divergence in demand & inventories of gasoline and distillates: Low demand for gasoline is evident due to expectations of an economic slowdown while gasoline inventories remain elevated. Though, distillate consumption remains high as inventories are declining and lower than the 5-year average range.
Chart: Divergence in inventories of distillate and gasoline (Source – EIA 1 , 2 ).
Moreover, inventories of gasoline and distillates are higher than usual. Both factors together have led to a gloomy outlook for refined product demand. Gasoline stocks have started to increase while distillate stocks are still declining.
When refined product inventories are elevated investors can position short on the crack spread in anticipation of ample supply. Conversely, if refined product inventories are low, investors can position long on the crack spread.
Chart: Divergence in refined product inventories in US (gasoline rising and distillate declining).
2) Declining crude price and tight supplies: In September, Saudi Arabia and Russia announced supply cuts extending into January. Globally, this led to a supply deficit of crude oil. Supplies of crude in the US was particularly stressed as refiners increased utilization to build up inventories while margins were high and exacerbated by a pipeline outage.
Chart: Crude Oil inventories in US have stabilized in September and October.
Following increase in oil prices, refining activity has slowed, and supplies have become more stable.
When inventories of crude are stable or elevated, it indicates less demand from refiners. Investors can opt to position long on the crack spread anticipating ample crude supply.
Chart: US Refinery Utilization and Crude Inputs have slowed in October.
Although, crude oil supply cuts from Saudi are going to continue until January 2024, there is no longer a deficit as consumption has slowed down.
Together, both trends have caused a sharp collapse in the crack spread. Value of the 3:2:1 crack spread has declined by 50% over the past month.
Prices of refined products have been affected more negatively by low demand than crude oil. Inventories and supply situation for refined products is more secure than crude oil. Still, seasonal trends suggest an expansion in crack spread once refined product inventories start to be depleted.
HARNESSING GAINS FROM CHANGES IN CRACK SPREAD
Two hypothetical trade setups are described below which can be used to take positions on the crack spread based on assessment of current conditions.
LONG 3:2:1 SPREAD
Based on (a) sharp decline in crack spread which is likely to revert, and (b) seasonal trend pointing to increase in the crack spread, investors can take a long position in the crack spread. This consists of:
• Long position in 2 x RBF2024 and 1 x HOF2024
• Short position in 3 x CLF2024
The position profits when:
1) Price of RBOB and ULSD rise faster than Crude.
2) Price of Crude declines faster than RBOB and ULSD.
The position looses when:
1) Price of Crude rises faster than RBOB and ULSD.
2) Price of RBOB and ULSD declines faster than Crude.
• Entry: 63.81
• Target: 79.12
• Stop Loss: 55.73
• Profit at Target: USD 45,930 ((Target-Entry) x 1000 x 3)
• Loss at Stop: USD 24,240 ((Stop-Entry) x 1000 x 3)
• Reward/Risk: 1.89x
LONG 1:1 HEATING OIL SPREAD
Based on relative bullishness in distillate inventories plus stronger seasonal demand for distillates during winter, margins for refining heating oil will likely rise faster than gasoline refining margins. Focusing the expanding crack margin on a 1:1 heating oil margin spread can lead to a stronger payoff.
This position consists of Long 1 x HOF2024 and Short 1 x CLF2024 .
The position profits when:
1) Price of ULSD rises faster than Crude.
2) Price of Crude declines faster than ULSD.
The position will endure losses when:
1) Price of Crude rises faster than ULSD.
2) Price of ULSD declines faster than Crude.
• Entry: 36.15
• Target: 42.79
• Stop Loss: 32.3
• Profit at Target: USD 6,640 ((Target-Entry) x 1000)
• Loss at Stop: USD 3,850 ((Stop-Entry) x 1000)
• Reward/Risk: 1.72x
KEY TAKEAWAYS
Crack spread refers to the gross processing margin of refining (“cracking”) crude oil into its by-products.
Refined products RBOB and ULSD can be traded on the CME as separate commodities. Both are representative of demand for crude oil from distinct sources.
There are three types of crack spread: 1:1, 3:2:1, and 5:3:2.
a. 1:1 can be used to express views on the relationship between one of the refined products and crude.
b. 3:2:1 can be used to express views on the refining margin of refineries.
c. 5:4:3 can give a more granular view of proportions of refined products produced at refineries but is far more capital-intensive.
Crack spreads are affected by seasonality, supply, and inventory levels of crude and refined products, as well as demand for each refined product.
A low-demand outlook for refined products of crude is prevalent due to expectations of an economic slowdown.
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.
Sell Dec. unleasded at 221.95 on a stop, tgt 215.45, stop 230.95**Trading commodity futures and options involves substantial risk of loss.
The recommendations contained in this letter is of opinion only and
does not guarantee any profits. These are risky markets and only
risk capital should be used. Past performance is not indicative of future results**
hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.
one of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. in addition, hypothetical trading does no involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. there are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.
Gasoline futuresOn the above 4-day chart price action has corrected 27% from the peak and 15% following the confirmation of the head and shoulders pattern, an expected measured move. A number of reasons now exist to expect an move up. They include:
1) RSI resistance breakout.
2) Support and resistance. Price action confirms support on past resistance.
3) Regular bullish divergence.
4) RSI crosses up 35. This is significant. Look left. History tells us the following move up from this oversold condition has never been less than 20% and never been more than 700%.
Is it possible price action continues to correct? Sure.
Is it probable? No.
Ww
Type: trade
Risk: <=6%
Timeframe for long: 4-12 days
Return: 20% without leverage
GASOLINE Excellent short-term buy opportunity.Gasoline (RB1!) is on a minor pull-back on the 1D chart, below both the 1D MA50 (blue trend-line) and the 1D MA200 (orange trend-line). The 1D RSI has been rebounding since the October 05 oversold bottom, something that has done the exact same way the previous two times on May 04 2023 and December 08 2022. Both of those fractals have (so far) similar structure with the current sequence since the September 13 High, and both reached at least their 0.618 Fibonacci retracement level on those rebounds.
As a result, we are taking advantage of the current pull-back to get a more comfortable low risk buy and target 2.500 (marginally below the 0.618 Fibonacci level).
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Gasoline futures portend pleasure at the pumpAmong my favorite charts this time of year is that of RBOB gasoline futures. Often as Halloween approaches, wholesale gasoline costs start coming down significantly from highs in the summer. Call it a nice treat for commuters and families around the country. As it stands, the prompt-month of RBOB is now under $2.20 - that's a fresh 10-month low should we close here.
RBOB at $2.18 means that retail pump prices should continue their recent trend lower, eventually finding the $3.20 mark if the historical premium of about $0.95 holds. It's key to remember that the price difference between the futures and the retail cost of a gallon of regular unleaded depends on a host of factors - taxes, transport costs, refiner margins, and refinery outages being among them.
I see a bit more downside ahead on the chart. Consider that, according to seasonal data from Equity Clock, RBOB tends to move lower from mid-October through early December. That could mean gas prices under $3 in terms of a national retail average by, say, Christmas. Keep your eye on the low from last December - $2.05. Another layer of possible dip-buyers could come into play near $1.95. On the upside, I see resistance near $2.45 - the range lows from this past May and June.
GASOLINEHI, GASoline really near to my best buying level (2.3) I will buy it right there it could give me nice pull back ......share with your friend .....
Gooooood Luuuuuuuck
GASOLINE: Over the 1D MA50, estabilising the new rally.Gasoline is on a neutral 1D technical setting (RSI = 51.588, MACD = -0.026, ADX = 46.131) as it only crossed over the 1D MA50 on Monday. That was after a 3 week consolidation between the 1D MA50 and the 1D MA200, which held and kept the price over the bottom of the long term Channel Up.
We consider this breakout as the final confirmation of the new rally to the top of the Channel Up. Buy and aim at a rise close to +30% (TP = 3.200).
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Gasoline price will increaseInformation about the war in Ukraine and other disruptions to the global energy market will affect the oil price. However, it is important to note that gasoline prices are not always directly correlated with crude oil prices. For example, if OPEC increases production, it could help to keep gasoline prices down.
Entry: 2.6086 - 2.4844
TP1: 2.9470
TP2: 3.3276
SL: 2.3279
RBOB Gasoline FuturesGood morning,
I have traded this for the last 15 years, I am 14-1 on this trade, has a high probability of success. Time Frame is 8/2-8/19. The initial "crash and return to mean" is due to the seasonal demand consequence of the market. Low margin req, calender spreads would be a good option, I will let you figure out the set up as I can't give everything away. Entry can be tricky as, 80% of the trades in the last 15yrs have been initiated on 8/2, the other 20% on 8/3 to 8/4. After analyzing the trades the best equity option for this trade is usually realized between 8/8-8/11 (15yr average best entry range) as an entry and it varies however that is why you need to be monitoring this extremely boring trade. Exit will be on 8/16->8/18. Now the other issue is the open interest on the September contract, if you will be going that route on the front or back end, as it will exit quickly between this exit timeframe so do not hesitate to offset contracts a little early as 42,000 barrels of gasoline showing up at your house is not part of the plan. Be diligent on this trade as it has a high success rate however there are some hidden pitfalls in this trade.
"No sleep and I sound like a suit again, vague, gives hints, and is kinda dumb." -Kewlkat
Cracking the Crack SpreadThe ‘crack spread’ is a term used in the oil industry that refers to the differential between the price of crude oil and the petroleum products extracted from it, such as gasoline and heating oil. The name comes from the process of 'cracking' crude oil in a refinery to produce these valuable products.
The spread serves as a measure of refining margin, or profitability, for oil refineries. When the prices of petroleum products are high relative to the price of crude oil, the crack spread widens, and refining margins increase, making it profitable for refineries. Conversely, when the price of crude oil is high relative to the products, the crack spread narrows, and refining can become less profitable or even unprofitable.
The crack spread is typically expressed in terms of the ratio between the input (crude oil) and the outputs (refined products). For example, a 3:2:1 crack spread assumes that three barrels of crude oil can produce two barrels of gasoline and one barrel of heating oil.
In the futures market, the crack spread can be traded by buying crude oil futures and selling futures in its products, thus locking in the margin between input and output prices. This can serve as a form of hedging against price risk for those involved in the oil industry.
This week, we will delve into various factors influencing the crack spread and evaluate their potential impact on the current spread;
Geopolitical Concerns
SPR Refill
One of the key points mentioned when we last covered oil was the potential refills of the SPR which are still pending as an attempt to purchase up to 6 million barrels was abandoned at the last minute. As the drawdown in the SPR continues, it seems inevitable that the Biden administration will have to replenish the reserve, likely pushing oil prices higher due to increased demand.
Russia Ukraine escalation
The simmering tensions of the Russia-Ukraine conflict leave us wondering if the price of crude oil might escalate further. The ongoing conflict focuses on a key port in the Black Sea. Consequently, this could potentially impact up to 20% of oil exports from Russia. Although most major nations no longer rely on Russia for oil supply, some countries are still buying from Russia. This leads to the concern that such countries might have to turn to the open market to make up for their supply shortage one day.
Seasonality
Crack falls in the 2nd half of the year
Seasonal trends indicate a pattern where the 3:2:1 crack spread declines in the second half of the year. This trend has persisted for 6 out of the past 10 years, with the average decline of 29%. Three of the remaining four years closed flat, with one year ending approximately 20% higher.
Economic Growth
Current economic growth weak but some soft landing expected
The year-on-year GDPs for major economies are trailing their long-term averages, indicating still fragile economic growth as industries and consumers grapple with sticky inflation and high rates. Weak economic growth generally dampens the crack spread, as industries and consumers cut back on spending, reducing the demand for refined products.
Currency
Interplay Between Dollar, Crude, and Crack Spread
The Inverse Dollar and Crude Oil has as long-standing positive correlation up until the Russian-Ukraine Crisis when both Crude Oil and the dollar move sharply higher. As this relationship now begins to normalize again, any weakness in the dollar could provide the fuel for Crude & the Crack Spread to rally again.
The crack spread is also highly correlated with Crude Oil outright prices, hence any view on crude oil can also be expressed using the Crack Spread.
The crack spread hit an all-time high in June 2022 amidst the Russia-Ukraine tensions. Currently, the spread trades at a higher range relative to the past two decades and seems to face some resistance at the previous all-time high in 2013.
On a shorter timeframe, the crack spread appears to be breaking out of a symmetrical triangle to the upside, typically a signal of bullish continuation. With prices slightly dipping, this could present an enticing opportunity.
On balance the impending risk of the geopolitical event breaking out as well as the structurally weakening dollar seems to outweigh the seasonality and economic weakness effect. To express our view on the 3:2:1 crack spread, we can set up a long position on the crack spread. This can be set up by buying 2 RBOB Gasoline Futures & 1 NY Harbor ULSD Futures and selling 3 Crude Oil Futures at the current level of 114.5, stop loss at 97 and take profit at 140.
The calculation of the 3:2:1 crack spread should also be noted as: (2 * RBOB Gasoline Futures + 1 * NY Harbor ULSD Futures ) * 42 – (3 * Crude Oil Futures). The factor 42 is multiplied to the RBOB Gasoline Futures and NY Harbor ULSD Futures as the two are quoted in USD per gallon, this converts the price quotation in Barrel terms, which is the same as Crude Oil Futures.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. 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
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Reference:
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