Oil Meltdown - What Now?
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It can be very daunting entering either long or short after such a massive drop; I have a downside target chart published already 'Oil Channel - If It's Not Broke'; however created this chart for new short entries in the even that we see a bit of a retrace.
Today was quite the rate meltdown in oil; it seems that the pre-fomc game of chicken is over. Both Long and Short entries can be very daunting after such a large drop. I try to keep it simple and look for previous daily supply/demand levels and in this case; I think that the 100 and 200 Daily MA's will come into play.
I generally see a bounce on the first touch of a closing price trend line and/or a stop short so that the next day opens above. I'm expecting a slowdown in the decline at the trend line (49.6-49.84) and expect selling at the previous supply/demand exchange (50.47-50.91); however, I am still looking for further breakdown near 48.5 by next weeks FOMC meeting March 15/16. Note: my selling level and first target are in line with the 100 and 200 Daily MA's.
In Summary:
Add shorts/sell: 50.75-50.91
SL: 51.75
TP1: 48.6
TP2: 46.1
Good trading all!
I created this chart mainly for a new short opportunity after today's massive drop; for my 8 week view with similar downside targets and a potential large rally after, please see my previous chart, 'Oil Channel - If It's Not Broke'
Today's song of the week: Appropriately, Tom Petty's 'Breakdown'... BigEz
youtube.com/watch?v=fsKsFU766Io
Today was quite the rate meltdown in oil; it seems that the pre-fomc game of chicken is over. Both Long and Short entries can be very daunting after such a large drop. I try to keep it simple and look for previous daily supply/demand levels and in this case; I think that the 100 and 200 Daily MA's will come into play.
I generally see a bounce on the first touch of a closing price trend line and/or a stop short so that the next day opens above. I'm expecting a slowdown in the decline at the trend line (49.6-49.84) and expect selling at the previous supply/demand exchange (50.47-50.91); however, I am still looking for further breakdown near 48.5 by next weeks FOMC meeting March 15/16. Note: my selling level and first target are in line with the 100 and 200 Daily MA's.
In Summary:
Add shorts/sell: 50.75-50.91
SL: 51.75
TP1: 48.6
TP2: 46.1
Good trading all!
I created this chart mainly for a new short opportunity after today's massive drop; for my 8 week view with similar downside targets and a potential large rally after, please see my previous chart, 'Oil Channel - If It's Not Broke'
Today's song of the week: Appropriately, Tom Petty's 'Breakdown'... BigEz
youtube.com/watch?v=fsKsFU766Io
Nota
My apologies, the Supply/Demand Exchange on the chart should read: 50.75-50.91Trade attivo
This trade is active, the 50.75 supply level has been reached and I have opened a short position at 50.75Nota
Target 1 is almost upon us at 48.6; my recommendation is to take some profits and go partial commando... Out of some of your shorts.
Nota
Target Price 1 reached, again I am advised to take partial profits. I believe we may see a stop hunt below the 200 daily MA and then a potential bounce at 48.33-48.57 zone. I will look for a entry point to re-add those partial short if we do see a bounce later today or tomorrow.Nota
After taking some profits at 48.6, I am holding remaining short positions and will add/re-add short positions at 49.61-49.84 level if prices rally further. I believe prices may run as high as 50.37 on a short term rally before selling takes over. If you prefer less risk, I would advise adding shorts at the 50.05-50.37 level. Overall looking for some consolidation to break down the 200 MA level over the next few trading days. Good trading all!s3.amazonaws.com/tradingview/snapshots/b/BKpBPzoS.png
Nota
49.61 shorts added; we may see more upside but with 100 pip rise after closing partial short positions yesterday, I think it's a good move to re-add as I see more downside next week. Lets see how Friday plays out, good luck all.Nota
Short lived rally after NFP/Employment numbers came out today; but the shorts that were added at 49.61 are back in the money; IF prices rally again, I would still expect heavy selling at 50.37 but so far it looks like the rally was short lived. In my opinion, the DX is now back at support and I am expecting oil to continue it's decline into the end of next week.Nota
Nice job if you partook in adding short positions at 49.61; it worked out well today.For next week, I will focus on today's weekly close. Much like pivots, the supply/demand levels that I mark represent buying/selling climaxes and these levels are very significant on a weekly chart. If prices break and close below a weekly inflection, it tells me that where buyers were previously absorbing supply, that they have given up and supply is now taking over. This is the case this week and a perfect example. The weekly candle has closed just below the 48.57 weekly inflection and this suggests that prices will now target the next low weekly inflection, which is at 45.99. This does not mean that prices will not go back above 48.57 or below 45.99, it just means that buyers at the 48.57 level have stopped buying at that level and deeper selling is now likely. Great job if you remained short this week, is was a rare play on monster volume.
For next week, I believe that 48.6-49.2will remain a selling level if prices see a brief rally and although risky at this point, I will be adding shorts on Monday's open at het current level looking for an early week move to the 47.7-48 level possibly seeing the 46 target reached by the 17'th/20th.
Good trading all!
s3.amazonaws.com/tradingview/snapshots/o/o4GDc8cA.png
Nota
3/13 Update:I am still looking for a 45.60-46.10 bottom target; I believe that after a test of 47.40 that prices may fall
into the 11/25 candle breakdown range shown on this chart (47.97-45.96).
In an effort to buffer a potential spring and/or early rally as I switch to a long model I will:
-Take partial profits at 47.41; and if prices retrace to 47.90, re-add those short positions.
-Take partial profits at 46.60; and if prices retrace to 47.10; re-add those short positions.
-Exit all short positions at 46.10. If prices break below 47.30 I will be publish a buy/long model
with target prices to accompany my 'Oil Channel - If It's Not Broke' chart.
Nota
As per the chart above, I have closed partial short positions at 47.41Nota
and have now re-added those short positions at 47.90Nota
Still being patient waiting for the downside targets to hit; however, after such a strong bullish reaction following the API reports just be aware that I see a good possibility of prices testing as high as the 49.2/49.3 level following tomorrow's EIA report. Prices are already above the 47.97 cap i thought we'd see at this point. Though prices may need to consolidate 'around' the 48 level for a bit, I a still looking down at my next target of 46.6.Good trading all!
Nota
No changes to yesterday's update; I'd mentioned the possibility of prices testing 49.2/49.3 level following EIA; prices briefly tested above 49. I am viewing 48.9-49.2 as a supply/selling zone and my outlook remains the same; I am targeting 46.60 and then 46.10 when I will start my long model. That being said, the drop in the DX was surprising to me, however, it did not seem to have much of an effect on oil prices; rollover the next few days, more volatility is likely.Nota
Being a position trader takes a lot of patience and even more conviction. Although holding short during the swings this week can be frustrating I find it important to stick to your plan and maintain your risk management strategy. Do not let large swings end up causing emotional changes. I simply prefer the long game and my outlook has not changed; Although this chart is still outstanding looking for TP2, for those of you looking to enter add new short positions, we will see the continuous chart above roll into the K (May) chart soon so I've provided a K chart for new short entries here:
Please let me know if you have any questions and I would love to hear any comments, criticism, ideas; especially from the fundamental traders who can offer a different perspective. Please chime in with any thoughts on oil related Kenysian'isms!
Have a great weekend all!
Nota
3/21 Update: There are a few revisions to my last update regarding Profit taking levels:Today finally saw a significant breakdown below the 48.33-48.51 Supply Exchange; I am now looking at that level as a selling zone.
Profit Taking revisions: I am advising to take partial profits at 47.05; if prices see a bounce after that we may look to add shorts again at 47.70 if that path comes to fruition.
Below that I am still advising to take partial profits at 46.60 with the potential to re-add shorts at 47.10
I am still recommending to close all positions by 46.10 level; however as we have now rolled into the May contract and the May chart shows a weekly demand level at 46.22; closing all positions by 46.25 may be a safer place to completely exit all short positions.
Overall I am looking for a reversal back into a bullish trend between 45.60 and 46.10 please refer to my 'Oil - Demand' chart.
Please let me know if you have any questions or comments,
Good trading all!
Nota
Closed partial positions at 47.05; if prices retrace to 47.70 I will re-add short positions; if prices do not retrace up, stay on track, be patient and I will close additional positions at 46.60. As stated in last update I am looking to close all short positions between 46.10 and 46.25 where I will start a long model.Nota
Well I did indeed close partial positions at 47.05 and re-add those shorts as advised; unfortunately the re-adding was too soon as the 47.05 bounce was much stronger than I'd anticipated. My overall view and bottom target price has still not changed. As you can see on the chart we have two daily inflections created since the initial drop from 3/8. As prices today closed at yesterday's inflection of 48.15; IF prices continue to rally I will expect the previous inflection will act as resistance and will look for selling between 48.6 and 48.9. Please see the chart below:s3.amazonaws.com/tradingview/snapshots/x/xKGBq4ih.png
Good trading all!
Nota
Note: the chart above is a May (K) chart; following rollover, I believe it provides a clearer view.Nota
3/23 Update: If you click play on the original chart above you can see that prices found resistance at the 48.33 daily inflection level; this was a relief as yesterday's daily candle looked typical of a bullish reversal but had no follow through today; On the K (may - current front month chart; I find it important to also chart this as it is now the front month) below you can see that today prices closed below the lowest daily inflection in the current daily range as well as below the 3/14 daily low; this suggests to me that more downside is coming.s3.amazonaws.com/tradingview/snapshots/e/e5Oe6nVi.png
My outlook remains the same, I am still targeting 45.6-46.1 bottom zone and am still recommending taking partial profits at 46.60 as I see a potential bounce level at 46.5/46.6; if that does happen, as described above I will look to potentially re-add those short positions at 47.10. If not and prices just continue down I will close out all short positions at 46.10.
Note: There is weekly demand level on the K (May) chart at 46.22; and exiting all position just above that level 46.25-46.3 may be a safer play, that is your call, I just wanted to make you aware of it. Please let me know if you'd like me to show that level on a K chart.
As well, if you are not familiar with some of what I just mentioned - K, font month or futures rollover; even if you are not trading futures, I highly recommend familiarizing with this process. If you are interested let me know and I can post a couple of links to Investopedia,com as I find they are a great source of futures trading material
Good trading all!
Nota
3/24 Update: Essentially no changes to yesterdays update or to my initial outlook, prices once again tested but closed below the 48.15 daily inflection. On a rally I am still expecting selling below the 48.91 daily/weekly inflection, overall daily chart is still bearish showing lower daily highs and lows. OPEC is meeting this weekend and next week is monthly close; potential volatility on next weeks open.s3.amazonaws.com/tradingview/snapshots/g/Glr6kbk4.png
Good trading and have a fabulous weekend!
Nota
Prices are back at the supply/selling zone
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