Daily WTI fundamental and technical analysis

Global Markets Commodities Oil and Gold
23

[B]WTI continues to rally[/B]

WTI closed above the $40 level today with no sellers in sight. The big question is who is buying the market and why? The aggressive move which began last week has been attributed to meeting in Doha this weekend, as well as, strong demand for gasoline.

Algeria’s oil minister came out today and stated that Russia refuses to cut production. If true we can add Russia to the list of countries who have increased production or will not cut; namely Saudi, Iran and Iraq. So if key oil producers are not going to cut production and the output freeze will not help the market, who is buying the market?

It can’t be Managed Money (Hedge Funds) they have been reducing their net long positions over the past couple of weeks.

That only leaves speculators who are buying up everything they can get their hands on, certain that Doha will produce a positive result and that the weekly oil reports will continue to show drawdowns.

Taking all this into consideration, my current short position at 39.00 is not looking pretty. If we continue higher tomorrow I will gladly take a huge lose and accept that the market is running on pure speculation. There are no concrete fundamentals driving this price action. If anybody is in a long position, hold on and see how high it can go. Do watch out for the American Petroleum Institutes (API) oil report after the close tomorrow. All we need is a build in total crude stocks and gasoline inventories to confuse the market.

24

[B]The oil bears are patiently waiting[/B]

WTI reached further into the 40’s yesterday and made a new yearly high above the $42 level. The aggressive buying behaviour has not stopped and was given further motivation from news sources stating that Saudi and Russia had reached an agreement to freeze production. Now it hasn’t been confirmed that this in fact true and Russian oil minster has a habit of putting out headlines to gauge market reaction.

It wasn’t all bullish though, Iraq has stated that it will cap production at 4.8 - 4.9 million barrels per day. What is important, is that December 2015 production was at 4.25 million barrels. So it seems key producing nations will agree to freeze production at levels higher than last year. Makes you wonder why the market is rallying?

From a technical perspective the price has consistently pushed through the upper levels of resistance for three sessions now. However at some point the bears will step into the market and my call is that will happen sooner than later.

The American Petroleum Institutes (API) weekly report has got the market second guessing itself with a build of 6.223 million barrels. Just what the bears need to get back in the market.

At this point it comes across as crazy to still be in my short at $39.00 and wilder to state that the market is going to pullback. At current technical levels the drop is to $38.50 which will be updated on a daily basis.

Watch those oil report numbers today, a build above 6 million and the bulls will be taking profits real quick.

25

[B]WTI looking heavy at $42[/B]

WTI made a new high for the year on the back of a larger than forecast drawdown in gasoline inventories. However, the bulls were held back by a substantial build in total stocks.

The newsfeed has been busy with the Iranian oil minister not attending the meeting this weekend, then a delegate will be sent in his place, then he may confirm before Sunday.

The Russians were busy stating that the final outcome of the deal will be stated on the 20 April in Moscow. More importantly the agreement will be “loosely framed” basically stating that there are no rules and everybody can do as they please.

OPEC added to the news flow with a reduction global oil demand for 2016, not that the market paid much attention.

Iraq also felt the need to hit the headlines with “something needs to be done about the 2 million barrels per day supply glut”. This is the same country that has increased production since the start of the year.

Despite all the news the bulls are still firmly in control of the market. I see WTI looking a bit heavy up there at $42 and sooner or later it will pullback. The current level is $38.50 which should make for interesting couple of weeks.

26

I was short and while I was sleeping I got margined out before I could pad my account. With what little I had left, I flipped and went long and increased my account 400%. Today I was margined out again and lost my 500 % gain. So I am short again, where I belong. My target is $38, we are not far off.

27

Dude, sounds like your risk is off the chart. Oil is a beast that can only be tamed with large margin to spare.

28

How long have you been able to keep this account funded w/ those types of moves?

29

Still Funded at this moment with the original money. This is a bit of a sport really, I am hoping to catch a chain of right aggressive moves. I went from %100 balance to 10% balance, back up to 50% balance, down to %10 again. Currently, at 25% balance. Concerned about opec impact, whether I am on the right side of it or not. If I am I will be spiking back up to %50 plus balance or being margined out again.

30

Iran didn’t even show. This is going to epic as longs go rushing for the exit. My balance will be back above the %100 mark. With the right maneuvers perhaps a %1000 balance is coming.

31

Sure enough, I became to greedy and increased my position trying to multiply my account 10 fold. I could have had a gain of 300% to 60% original balance. I didn’t exit and I was margined out. My account is at 20% of original balance. Oh well.

32

Bulls are trying to keep the market up, losing proposition for them. I could have realized a %200 balance increase, now I am teetering trying to maintain my %100 of current balance. Oh well, my approach is going to lock in incremental gains.

33

Thing about oil trading, the string pullers will try to shake out the heavily margined so they can margin you out and take your money. I have learn this the hard way. Key is to try to find the balance of position and margin cushion. Brent is not trading yet, That is going down like a rock when it opens. Fast money for the minute trader.

34

If you get into a position size where you are not margined out, this will get to $37.70 is my 2 cents. I see they gapped it down to support/resistance level, thinking that will be the new baseline. Once 38.90 is cleared, $37.70 will be the target.

35

There is no way you’ll survive trading like that.

36

How did the market recover today​:interrobang::confused:

How is it possible that WTI pulled back above 40 when the worst possible scenario came out of Doha? Believe it or not, that was the most likely move of the day after opening with crash during the Asian session and here’s why.

If you look at the first picture, the red box represents a large gap that has been formed in the market, now what happens is gaps get filled. So you’ll notice that after the price “gapped lower”, the market spent the rest of the day “filling the gap”. I know what you’re thinking​:exclamation:WOW, that’s a great indicator to buy because "gaps get filled":exclamation:Yes they do and NO don’t trade it because that is not a strategy, just like “scalping” is not strategy in my opinion. So that partially explains the move higher today.

The other elements are a weaker dollar which seems to have a tough time holding onto any gains. There is bound to be some reposition by Managed Money (Hedge Funds) after yesterday’s news, large players getting out of long positions. On top of this, volume is also switching from the May to the June contract. In the pictures of the futures contracts you’ll see the volume is higher for June, usually the current contract (referred to as the front month contract) has a higher volume, confirming a repositioning of Managed Money.

So that’s the technical stuff out of the way, let’s take a look at the news which is very interesting.

The deputy Russian oil minister stated that the non-OPEC producer will meet with Saudi to discuss a production freeze. Just goes to show how much they need this freeze to be agreed, the Russian budget is not looking healthy😰

Kuwait and Angola came out saying that they will increase production📈 So it seems this year will be another roller coaster ride.

The BIG news over the weekend is between Saudi and the U.S.:bangbang:There is a bipartisan bill (agreed by both republicans and democrats) to give victims of 9/11 the right to sue foreign nations. Basically giving the families of 9/11 a platform to sue Saudi and any other nation they can claim were involved. Understandably Saudi are not impressed and are very willing to use oil as a fierce political tool. Obama who will be in Riyadh on Wednesday and does not support the bill, will have to make delicate diplomatic steps before this gets out of control.

So what about the technicals? The key is number is 38.87, as long as we can stay above that we’re bullish. Yup, bullish as in going up❗️Expect pullbacks but I don’t see a technical reason to sell.

The fact that we have bearish fundamentals and bullish technicals tell me to stay out of the market⛔️ I’m keeping my finger off the trade button this week. Let’s wait for the contract to rollover from May to June, the Doha info to filter into the market and see what the oil report has in store.

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37

Interesting read, but way to complicated. Simply put once price cleared the 40 week moving average on the weekly chart you have to be bullish. Unless OPEC of other oil producers change their currently position then we should see prices continue to rise. Next level of resistance is last Octobers swing high of 51.90, Clear that then 62.00 comes in to play.

on the currency side, shorting USDCAD has been a great play to take advantage of these rising oil prices

ETF’s plays, XOP and XLE are up 18 and 12% YTD