How did the market recover today️
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 thinking️WOW, that's a great indicator to buy because "gaps get filled"️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.️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 up️Expect 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 market️ 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.