Crude Oil and oil markets

Just want to add the current 1Hour chart showing the price action from yesterday morning to this morning. You can see yesterday’s short-term opposing reactions and confusion between bulls and bears quite clearly, especially compared with the rather nondescript daily candle on the daily chart in the above post. Another example of the need to keep an eye on the long-term charts - it is so easy to lose sight of the overall picture if one only remains submerged in the rotations of the 15m-1m charts. - If you want to look at trees, then walk in the woods. But if you sometimes want to also see the forest, then sometimes take a helicopter…

Key observations: The near-term yellow band is still under the longer term green band and we are trading under yesterday’s daily pivot (blue dashed) and at the bottom edge of that horizontal band. This suggests that the market is still more vulnerable to bearish inputs and I am not buying until I see an hourly close through the green band and above the pivot - and only then if the 4H is looking sympathetic to an upmove.

The situation is a bit complicated today because of the fact that current CFD’s expire tonight and any open positions will be automatically closed after the normal day’s close, so positions cannot be kept open overnight even if one is taking a longer term view. So we are limited today to a day-trade scenario, but that is shadowed by, and until, the upcoming EIA release later…


Thank you both for the reassurance! :slight_smile:

Maybe, if there are readers here, then this would be a good point to revisit what are my intentions here with this thread!

Crude Oil is a new trading market for me. Although I have traded interest rates and currencies for many years, I have never seriously traded a concrete, tangible, commodity before. Much of the trading environment is the same, but much is also very different. A physical commodity also has an entire industry around it which also adds a huge dimension of simple plain interest in addition to the direct fundamentals and price action.

So I started this thread as a "Newbie"s venture into a new world of commodity trading, where anyone who is interested can explore the nature of the commodity, and its industry, and its various participants, in addition to trading the market itself.

I am trying to form a personal commentary and opinion as I learn about, and explore, the various forces at work in this market, but also using technical analysis to confirm or reject my views, and to provide reference points for timing and appropriate levels for trade entries and exits. I am therefore posting charts purely to illustrate my thoughts and current price activity. I am not looking to promote a specific trading method here. Although, of course, technicals is another relevant area open to discussions!

I am not focusing on any particular timeframe for trading and am using a Daily, 4H, 1H and sometimes a 15m analysis. My trades tend to be intraday/overnight at present simply because of my historic trading style, but I am looking to stretch my horizons to include longer term positions as well depending on the market view.

I keep a strict money management control over trading but I do not maintain any kind of targets objectives. I believe the market can only give what its price movements can offer. My concern therefore is only to read the movements and the underlying market/industry factors and to make disciplined trades accordingly, and to thereby make a profit on my trades according to, and limited by, what the market will offer. In this way, the cumulative size of those profits is a reflection of quality of the overall market movement at the time rather than a pursuance of a fixed percentage gain regardless of market conditions. I don’t ever want to feel pressurised into finding a trade even when there isn’t a sensible one to be found just to reach some pre-defined target percentage that has no bearing on the market’s ever-changing characteristics. The market is the boss, not me.

So my objective is both personal development and also to provide some background knowledge, stimulation and interest to anyone else who may be keen to try this market. And in that sense, as a Newbie myself here, any sharing of views, information, trading experience, etc is truly welcome! :slight_smile:


Yes, you are newbie having so much knowledge on the price movement. Does not matter it is Forex or commodity .

Manxx…
I just want to let you know that I am enjoying this thread so much. And you.
For calling yourself a newbie, man, you are intelligent. What good write ups you have!
It kind of doesn’t seem fair that you’re doing all the leg work, which probably requires some hours, and then all we have to do is read this and then digest it.
Well, I just wanted to tell you that this stuff is very, very interesting.
You just might bring me into it.

GOOD JOB MANXX!!!

Mike

You are right that there are many similarities and the trading issues like risk and funds management are generic, but there are also other trading issues which are different.

I was not aware, for example, of the existence or significance of the EIA weekly crude inventories figures, or who is the EIA and who is the IEA, etc. Commodities have their own equivalents of forex NFP, FOMC, etc. I have also yet to witness how the bid/offer reacts in unexpected major critical events…maybe I am over-cautious, but I don’t think that is such a bad vice! :slight_smile:

Also, it takes time to familiarise and adjust to the typical scale of moves and where to place sensible stops and targets, etc. CFD’s are different to spot forex and have different characteristics and a spread of 5 pips instead of 0.2-3 pips and a small commission makes a big difference to what kind of trading to look for.

But, yes, I agree, the changeover was not as dramatic as I had feared it might be - at least not yet…

Hi Mike! :slight_smile: Good to see you here! I have been spying in on your journal from time to time - an interesting journey you have been making as well! :slight_smile:

I am glad you find the content interesting here. I enjoy exploring the sources of information and the entire industry fascinates me. It also leads to a lot of new learning about, for example, countries that I previously knew little about, organisations, economies, geological and technological matters, transportation and maybe a million other things…:slight_smile:

We are seeing the current vulnerability to more bearish news following the EIA release which showed a smaller than expected draw in US Crude stocks (1 mill barrels v. expected 1.5 mill) as well as a higher than expected increase in gasoline stocks (rose by 1.5 mill barrels v. expected drop of 1.9 mill). Both figures describing larger stocks than anticipated.

However, whilst prices are sagging and indeed looking vulnerable to further declines - it is not really happening - at least not yet!..there seems to be good support here around yesterday’s lows and there simply doesn’t seems to be any great selling enthusiasm here at all - but time will tell…

I am not going to sell at all, but will wait and see if we climb back above that 52.50 line again and, if so, then maybe that will prove sufficient buying interest to go long for the evening.


Update:

Well I certainly underestimated the weakness here! :smiley: …and missed a reasonable short trade. But at least I wasn’t long yet!!!

Actually, I have noticed a movement characteristic over the last 2 months since I started watching oil movements. Compared with forex, although oil moves very fast when it does move, it often takes longer to get started and continues for longer than expected. There have been a few occasions where I have decided not to enter a trade because the market hasn’t started acting immediately how I expected it to, only to see it move soon after abandoning the idea of placing a trade. Also, I have now several times closed a trade in profit much too soon, thinking the momentum has exhausted. These are good things to note.

But, as I mentioned sometime before, I am treating oil trading as a kind of investment in a commodity and really pretty much only looking to buy. So a down move like this is good ,even if I don’t trade it, as it provides better buy levels when the time comes - which it certainly will.

I have come to like the idea of only looking at the market from one side, i.e. buying. For a start, it removes 50% of the problems of decision-making and also 50% of the mistakes! :smiley: … or maybe I am just getting old!!!

Funny though, just now, as the market broke those lows from yesterday, I was reading an article how OPEC and some other oil-producing countries are now targetting $60 a barrel as the minimum acceptable level to satisfy their revenues needs and to encourage additional investment in oil production for the future. That level is now looking a further 70 cents away…

…and I still wouldn’t be surprised to see a rally back up again!!


Update to update:

I surrender! I never expected quite such a drop! So no trade today and I feel a bit disappointed about that - and not just a little embarrassed, too! In my “former life” as a forex day-trader I would be going to bed with a big smile after such a classic chart move. But that is how it goes…

I haven’t really found much to explain the depth of this move yet and all the thoughts need re-evaluating tomorrow.

But the one reassuring point from today was that in spite of my (wrong) fundamental belief that the market was still heading higher, the charts said the opposite and kept me out of the market. I always respect my technicals, otherwise they are a total waste of time. This is not some kind of technical “magic”, we just have to always remember that the prime objective of our technical analysis is to inform us what the majority of the other market participants are actually doing right now. It is very humbling to accept that the market knows better, but to ignore that is to put your money down the toilet…

I am still sticking to my policy of being a “buyer-only” and in that light I am happy to have last closed out in the 53.70’s and now in a position to repurchase from considerably lower when the signal comes. From an investing mode that is excellent - but from a trading mode? Hmmm, I really don’t know. I admit I feel a bit amateur at missing out on a good and straight-forward move…this is sooooooo different to forex day-trading! :slight_smile: BUt there again if I was a stock market investor, I would be thrilled to bits about it!!


In fact, I edited this to add the 15m chart just to show how easy this down move was!!!


Yesterday’s significant drop in prices, it seems, was sparked (perhaps not the best term to use when talking about gasoline!) by the surprise large increase in gasoline stockpiles rather than any change in crude inventories.

The Energy Information Administration (EIA) reported an [I]increase [/I]of 1.54 mill barrels last week, compared with an expected 2 mill [I]decrease[/I]. Whilst crude inventories did fall, crude production levels rose to the highest since August 2015.

This is what makes trading so [I][U]delicious[/U][/I]:

One day we can be talking of higher prices from OPEC cuts starting to bite, geopolitical tensions, and investment bank upward projections (Goldman Sachs and Citigroup predicting $65-70 by year-end)…and the next day we are looking at a seemingly bottomless drop due to US increasing production and inventories, a Syria attack that meant nothing other than an impact on US domestic politics and a naval armada that wasn’t steaming towards North Korea afterall! That’s what’s called dynamic brain stimulation (I just made that up!) :smiley:

Crude oil prices had indeed recently climbed significantly into the $50-60 range and the charts [I][U]have [/U][/I]been indicating a top-out vulnerability for a couple of days as discussed in above posts. This price rise was built mainly on the successful high compliance with the current OPEC/NOPEC production cuts. But this week’s US production figures have again raised the idea that rising U.S. output is undermining and neutralising these efforts to reduce the global glut and achieve a state of balance in the market - all at a sensible price level.

WTI ended up dropping by nearly $2 and was the biggest drop for some weeks.

But behind these figures, the other current factors are still unchanged.Globally, the market is moving closer to a balance and OPEC will still be deciding in May whether to extend production cuts for a further period (and by how much).

Needless to say, all charts are still in negative territory after such a sharp turnaround and I am watching the 1H/15m for the first signs of any return to buying - but it could be a longish wait and, of course, we may still see some continued weakness first!

Whilst my own account equity “stockpile” didn’t see any build from yesterday’s move, it didn’t suffer any draw either. So far this month, as at 19.04. we have had only 12 trading days and a long holiday weekend. I have made 12 trades so far, all long. Of these, only one was a small loss of 9 pips, and that was kind of technical as I didn’t want to take an overnight risk and closed out and re-opened the following day. So I am reasonably happy about that.

My main problem has been closing positions too soon, which is due to this phenomena that oil moves further per “leg” than I am used to from forex day-trading. I need to work more on my exit strategies! I guess this is also partly psychological as this is only my second month in oil and I am dedicated to the principle of “earn while you learn” so maybe I am too eager to take profits.

Whilst it is often said that it is “never wrong to take a profit” - it can actually be [I][U]very [/U][/I]wrong in the long term. Because it destroys the risk/reward ratio that should underpin anyone’s trading strategy! By cutting short the profits but not simultaneously adjusting stop-loss policy, then eventually your losses will start to degrade you profit potential and even destroy it totally. It is extremely important always to keep in mind that money management is not about one particular trade, but about an overall level of performance over a number of trades.

A quick word on the Daily chart:

We have now broken downwards away from that earlier range, and I am now focusing on what appears to be another significant range here at 51.35 to 50.75 that goes back a long way. I have circled several areas where this seems to have previously resulted in congestion and reversals, and may well be significant here, too.

The daily ribbon is certainly weakening but we are still above that 200 SMA. On balance, it would seem we are more in the middle of a broad, level range rather than a new down trend as such.


Hi Manxx,

Thanks for sharing your knowledge and trying to find the reason for a huge price drop. I am also in the learning phase of commodity but not with your style of learning frankly saying. I am novice in technical. What i used to do is, look for strong trend on any one of the commodity (NG, Crude, copper, nickel) and go for a trade. So far it is working good. Trade Opportunities are limited with this approach but at least 2-4 in a week.

Hi av0224, and thanks to you, too for sharing here! :slight_smile:

If TA is a relatively new field for you, what methodogy do you use to identify the strong trends? Do you just rely on a experienced eye on a plain price chart? I often use the toggle switch on my platform that hides the indicator “skin” so’s I can just look at the price chart alone and then replace the indicators again over it - it does help a lot!

I guess you keep you trades open for longer periods than just day trades? How do you judge when is a good time to exit your trades?

Personally, I think 2-4 trades per week is an excellent amount. It indicates that you are very disciplined with your entry decisions and give adequate thought as to its potential beforehand rather than spontaneously or intuitively just reacting ona moment’s whim!

Great to hear that it is working for you :slight_smile: Feel free to talk more about your experiences, if you wish!

Discipline after losing some amount of money without having minimum required knowledge. I just regularly watch the price of these commodities just to get feel of it. Keep an eye on forum discussions (i know only investing.com now babypips.com) for any important news or to see the mood of the traders as a sample.

As a newbie just tried almost all the technical (not in depth) approaches and finally ended with ichimoku (learned very basic) . Whenever i see close to 20-30 degree up / down on the lines with cloud in 5m chart enter the trade. Else no trade. Use 1H 4H 1D to know S/R. The same should be supported with news/ opinions from forum along with my guts feeling.
No carry position since i use leverage.
Today is copper’s day it was bottomed out and now moving up.

Interesting that you should mention Ichimoku. I used to also find that useful in forex, at least on longer TFs. I didn’t abandon it as such, it just naturally evolved into the MA bands that I nowadays prefer. (I have always been an MA fan - people often moan about them because they are so-called lagging indicators, but that is precisely why I like them, because they do lag! - and thereby show the current v. the previous :slight_smile: ).

My only difficulty with Ichimoku was finding a reasonable exit basis with it and it was through that need that I ended up developing my ribbons (now pipelines!).

Just for interest, here are a couple of 4H charts showing how the ribbon crossovers actually complemented the cloud rather nicely, especially with regard to optimising exits (in fact I had forgotten how nicely! :slight_smile: )

The red circle highlights the region where the price started to look vulnerable a few days back and ready for the drop that materialised yesterday - it was already there in the charts!

Maybe the ribbon crossovers don’t show too clearly on these charts, as I tried to get as big a range in as possible.

This shows the current period of strong trending:


This shows the period at the start of the year when the nmarket was tight ranging, the ribbon crossovers still helped to overcome the late entry lagging effect of the cloud in these conditions:


I thought of asking about your approach using the band which is new for me.
By the way the T & K cross over confirms the same, ichi might be little late than your band.
For intraday 1H 4H S/R are the exit points i follow.

Today crude is also showing good up move as i prefer in 5M but not convinced due to yesterday’s fall.

Yes, there has been some upside in London this morning but stopped, at least for now, at that 51.35.

My 15m chart reflects this move but the 1H warns me that it is too soon to buy yet, so I’m waiting to see NY action before doing anything more risky than washing my car in a day of brilliant sunshine here! :smiley:

15M chart small optimism showing, but:


1H chart, dark clouds still overhanging for now:


Today is bad day , many of SL have been eaten it seems, No trade in Crude from my end.

It has certainly been a roller-coaster - especially for anyone trading just off the short-term charts! Although I guess for a “floor trader” type scalper it was a fun ride! :slight_smile:

As mentioned above, the 1H chart had the shadow over it and that was not broken at all so there were no buying temptations at all today. and the 15m chart shows what a “yes it is/ no it isn’t” day it has been.

But it is not really surprising, there are very contradictory pressures in the frame right now and, although it has been an erratic day, the price range has been pretty tight within that new Daily range of 51.35 to 50.75 that we have landed in yesterday - if you look at the candle bodies on the 15m chart (when talking about S/R on a daily chart one cannot, of course, expect precision to the exact pip) - but “someone” seems to be finding value here. But it is clear there is still significant downside risk potential even here, at least in the near term…

In term of fundamentals, it really is hard to say where we go from here. Thankfully, we have charts! :slight_smile: Personally, I am still convinced that the OPEC/Non-OPEC alliance will still do whatever they can to keep prices somewhere at least nearer $60 because their own government revenues are desperately in need of it…but it might be months of similar roller-coasters before that!

Av0224, do you trade futures through a futures broker or CFD’s?

15M chart update:


1H chart update:


Here is one article with an explanation for yesterday’s surprise sell-off, for anyone interested:

Crude: Saudis go for the save | Futures Magazine

Here are the highlights for those only mildly curious! :smiley:

  • Saudi Arabia is trying to talk up the markets saying an output extension is all but done.

  • a 1.0 million barrel drawdown in oil inventory overall and in Cushing, Oklahoma the inability of the market to move higher started a cavalcade of selling.

  • At first, the movement was modest but an hour after the report, a big spike in volume started the market of its downward trek.

  • Part of the selling was perhaps due to the May Crude contract at the NYMEX is expiring,

  • but also due to a spike in computer related sell signals.

  • This morning we are seeing a bit of a rebound. After falling over 3% the market is now up over 1%. The reason is because Saudi Arabia is jawboning the market higher trying to remove any doubt that the OPEC and non-OPEC producers are on track to extend the historic production cut. Saudi minister of energy and industry Khalid A. Al-Falih said that “though there is a high level of commitment [to cuts], we haven’t reached our goal, which is to {get supply}to reach the five-year average. There is an initial agreement that we might be obligated to extend to get to our target.”

So that’s about it concerning yesterday! Time to move on to tomorrow…:slight_smile: