Crude is a pivotal moment Much above 75 and we could off the races. Conversely, if we get rejected up here and get some juicy red candles tomorrow and Friday 2/9, could see much lower levels in the weeks and months ahead.
QM1! trade ideas
Big Profits On Crude Oil Setup! Here is how to set up the retest of the opening range on Crude Oil.
The 5 minute opening range was established inside of the 4 hour supply zone.
This allowed us to take the retest of the opening range with confidence.
If you want to learn this technique then just click on the link in my profile and I will send it to you!
Follow up2.7.24 Gold Dxy Oil. In this video I show you how you could have taken profits of almost $3,000 on an oil trade depending on your entry. We worked with some of the tools that we use including ABCD patterns there was a an extension on the Oil that indicated that perhaps we should be exiting a long trade. We looked at the dollar with some detail to decide that it's probably going lower but we're not quite sure the extent but we picked two possible areas for the market to move and that affects how we would trade gold or silver
Possible rise in oil price to $80 in the next quarter?Possible rise in oil price to $80 in the next quarter?
On Tuesday, WTI oil futures rose to $73.50 a barrel, highlighting rising tension in the Middle East and concerns that this could disrupt oil supplies from the region. This was caused by the continued increase in U.S. strikes against Iran-backed militias over the weekend. However, U.S. officials have made it clear that they do not seek a broader confrontation in the region.
Last week, oil prices suffered heavy losses due to progress in ceasefire negotiations between Israel and Hamas, which significantly reduced supply risks in the Middle East. Although expectations of an immediate interest rate cut by the U.S. Federal Reserve have diminished and concerns about China's economic recovery persist, there have been no immediate supply disruptions.
One of the most effective ways to understand the possible future of oil prices is to examine the structure of the futures curve. At the time of writing this article, the oil price for delivery in March 2024 is $73.02 per barrel, while the price for delivery in June 2024 is $72.50 per barrel. This could indicate a slight increase or stability in prices in the coming years, but of course there can be many variables affecting the oil market.
We are experiencing backwardation. This phenomenon discourages conservation and instead promotes immediate delivery: why hold oil until March 2024 to sell it at a lower price than it is now on the open market? Backwardation usually indicates a greater balance between oil supply and demand, acting as a positive push on prices.
The oil market seems to have a good outlook for the bullish. The EIA recently revised future oil production downward, forecasting a significant decrease in U.S. production in the first quarter of 2024. Instead of the previous 12.8-12.9 million barrels per day, it now estimates an average closer to 12.7-12.8 million barrels per day, with growth already steady at ~12.9 million barrels per day in December.
Oil producers are also reporting a pause in production. U.S. shale oil producers' forecasts indicate a trend toward flat growth, almost completely disappearing. This means that with fewer resources to carry out drilling, the oil produced will decrease more and more.
In the future, we expect lower oil production and a possible surprise in demand, especially if the stimulus in China is successful.
China is one of the largest consumers of oil in the world.
When their market fully recovers, we expect an increase in demand that could cause a supply shortage and thus a surge in oil prices.
Currently, the situation from a technical point of view is negative.
Prices are below the 100-day moving average, in the area at 76.
The latest decline in oil prices was accompanied by the increase in volumes, which further strengthened the downward trend.
However My projection for the next quarter is that oil prices will reach $80 per barrel.
Don't miss my next article, where I will discuss the current situation in the natural gas market.
Oil (CL_F) Rally May Fail for More DownsideShort Term Elliott Wave view in Oil suggests that rally from 12.13.2023 low is unfolding as a double three Elliott Wave structure. Up from 12.13.2023 low, wave ((a)) ended at 76.18 and dips in wave ((b)) ended at 72.89. Wave ((c)) higher unfolded as a 5 waves where wave (i) ended at 75.75 and wave (ii) ended at 73.41. Rally in wave (iii) ended at 77.51, and pullback in wave (iv) ended at 76.06. Wave (v) higher ended at 79.26 which completed wave ((c)) of W in higher degree.
Pullback in wave X is currently in progress with internal subdivision as a zigzag Elliott Wave structure. Down from wave W, wave (i) ended at 75.85 and rally in wave (ii) ended at 78.14. Oil then extended lower in wave (iii) towards 71.79 and wave (iv) ended at 72.98. Final leg wave (v) ended at 71.41 which completed wave ((a)). Wave ((b)) rally is in progress as a zigzag. Up from wave (a)), wave (a) ended at 73.28 and wave (b) ended at 72.38. Expect wave (c) higher to complete at 74.23 – 75.38 area and this should complete wave ((b)) in higher degree. From this area, expect sellers to appear and Oil to extend lower. Near term, as far as pivot at 79.26 high stays intact, expect rally to fail in 3, 7, or 11 swing for further downside.
CL/WTI Bullish DivergenceHourly Chart Bullish Divergence
Break of HL
Entry at 0.382 fib retracement
For Continuation move up
1:1 RR
Update: Here is the fundamental and TA for Crude oil PricesWednesday we had inventory reports that showed an increase in US oil production combined with the feds hawkish interest rate sentiment which sent prices deep into discount. OPEC did announce they will be cutting oil production while US supply did increase apparently, US production has slowed down the last 18months. I believe next week this will start to reflect in the Crude oil inventory report, if economic data starts lessen it will give us a strong push to the upside amid the rising tension in the middle east (OPEC cuts and Nile attacks).
source:
www.nasdaq.com
Oil follow up2.5.24 Earlier today I posted a chart to show you that we should be looking for buyers on Oil. The market did find buyers after I produce the video.... around 10:00 am in the morning Eastern. I wanted to show you this market before the market traded into tomorrow and this gave me an opportunity to show you how the market looks and how I could stay with this market and make an analysis when officially we don't have tomorrow's prices..... actually I have them now because I'm typing this on the 6th... tomorrow. What is interesting about this market is that it looks like it may trade higher because of the dynamics of the reversal which was a very significant reversal from the low and the market hasn't retested that reversal... and so I showed you an ABCD pattern it may happen, But it might not happen..... I want to show you how to think in real time so that you can anticipate what the market might do.... then you manage your decisions. the probability at the time I did this video is that the market will continue higher for the reasons I stated on the video... this is because I'm looking at structural relationships and pattern relationships as opposed to waiting for indicators that are always lagging.... this is a very important issue to my trading. I never use the lagging indicators because a lagging indicator will never get you in at 10:00 in the morning. You may be getting long at 10:00 in the morning but you're not using a lagging indicator. most people use lagging indicators. most people do not make money trading. And if you listen at the end of the video your trade location is critical to your risk of drawdown and loss.
Demand on OilOil is presenting to us clear (marked with green rectangle) demand zone presented on chart. Yesterday there were multiple strong demand signals there identified real-time by Scanner. This zone becomes still valid, especially as it's placed within today's Balance Zone (between Gamma +0.25 and Gamma -0.25). Following price structure, it is supposed to retest demand zone from top and continue up move. Alternative scenario would expect to observe on chart consolidation in demand zone, as it's marked by market as fair price area.
Light Crude Oil Futures**CrudeOil:**
We are at a decision point, either it continues to fall if it closes below the channel, or tomorrow, if it makes a bullish engulfing, the trend will revert to the top of the channel.
MCL: Where is oil price heading amid geopolitical tensions?NYMEX: Micro Crude Oil ( NYMEX:MCL1! )
The price of a commodity is determined by its supply and demand. But in the case of crude oil, which is the lifeblood of the global economy, geopolitical risk carries a bigger impact.
Examples in present time: In February 2022, the Russia-Ukraine conflict sent crude oil up 72% to $124 a barrel. In October 2023, the Israel-Hamas conflict saw WTI price 40% higher to $94.
The rapid price rise following conflict eruption is called an “Event Shock”. Investors price crude oil in the worst-case scenario. Would it be the start of WW3, for the former event, and would the Gulf region oil production get cut off, for the latter event?
Typically, the fear for the worst is overblown. As the conflict progresses, oil prices tend to fall back down if that did not materialize. After the Western nations imposed embargo on Russian oil in 2022, Russia found new customers in India and China. We know that crude oil is a fungible commodity. The more the two countries buy from Russia, the less they will buy from the rest of the world. This helps keep the global oil supply in balance. Without a shortage, oil prices fell.
The Israel-Hamas conflict started in October 2023 so far has not dragged major oil producing nations into war. Even the Houthis Militia has been attacking commercial vessels in the Red Sea, they would not strike oil tankers from the Arab nations. Therefore, neither oil production nor its transportation was interrupted, and oil prices fell as a result.
The previous Sunday, three US soldiers were killed, and more than 40 personnel injured in a drone attack at a US base in Jordan. The US vowed to retaliate. Last Friday, it has launched strikes on 85 targets in Syria and Iraq, in response to the drone attack. On Saturday, the US conducted air strikes to 30 targets in Yemen, the homebase of Houthis.
With the US now engaging in military actions to militia backed by Iran, the Mideast conflict could be escalated to a whole new level.
In addition to geopolitical risk, there are other tailwinds to support stronger oil prices: The Organization of Petroleum Exporting Countries (OPEC) cut oil production last month as the group and its allies began a new effort to prevent a global surplus and shore up prices.
Output from the OPEC fell by 490,000 barrels a day (bpd) last month to 26.7 million bpd, according to a Bloomberg survey. About half the reduction came from Iraq and Kuwait. Led by Saudi Arabia, OPEC and its allies pledged to make additional production curbs this quarter, on top of reductions made last year.
In the meantime, oil traders will see headwind ahead: Data on Friday showed that U.S. employers added far more jobs in January than expected, reducing the chances of near-term Federal Reserve rate cuts. High interest rates tend to dampen economic growth and reduce oil demand as well.
Oil prices fell by about 2% on Friday and posted weekly losses after U.S. jobs data release. WTI crude futures settled at $72.28 a barrel, falling $1.54, or 2%. The global crude oil benchmark lost roughly 7% on the week.
Trading with NYMEX Micro WTI Crude Oil Futures
At about $72 a barrel, crude oil price is now below the price level before the Israel-Hamas conflict. It is also lower than oil prices before the Russia-Ukraine conflict. Is there a good reason why the price of the most strategically important commodity goes lower amid intensifying geopolitical tensions?
You may point out that oil demand may be dampened by the weak Chinese growth, but I would argue that the robust US economy would offset that.
Institution traders share my view. Money managers raised their combined futures and options oil position in NYMEX WTI and ICE Brent by 18,082 contracts to 117,226 in the week of January 30th, according to the Commitment of Trader (COT) report published by the U.S. Commodity Futures Trading Commission (CFTC).
To express a view of rising crude oil price, we could consider a long position in NYMEX Micro WTI Crude Oil Futures ( CSE:MCL ). The March contract (MCLH4) was settled at $72.42 last Friday. It declined further to $71.75 at the time of this writing. Each contract has a notional value of 100 barrels, or $7,175 at the current market price. CME Group requires an initial margin of $660 per contract.
Hypothetically, if the US strikes induce Iran retaliation and escalate the Mideast conflict, WTI futures could possibly go up above $90 a barrel. In this case, the $18 price increase (=90-72) would translate into $1,800 for a long futures position in NYMEX Micro WTI Crude Oil Futures (=18x100).
In my view, while the Fed may not cut interest rates immediately, it is still expected to lower rates at least 1 or 2 times, maybe at later meetings in 2024. Lower interest rates are also positive for oil prices.
However, if crude oil price continues to go down instead, each dollar of decline would result in a loss of $100 per contract.
Here are some extended readings on my previous trade ideas on crude oil:
October 9, 2023: Would the Middle East conflict push gold and oil prices higher?
October 16, 2023: MCO: Options Strategy to Capture Crude Oil Volatility
Happy Trading.
Disclaimers
*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.
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
Looking for a long trade in oil2.5.24 This video shows how to frame a long trade on oil. This is a setup for a long trade but there are no buyers just yet. In the meantime you get to see some of the tools that I'm using if you're new to my videos. My bias is at the market will move higher but if there's enough movement lower and it looks like the support area is going to be broken then there may actually end up being a good short trade. I don't think this will happen but I have to wait for some more bars... probably on the 4-Hour chart, but we may need to wait for the next training day.
CRUDE OILPreferably suitable for scalping and accurate as long as you watch carefully the price action with the drawn areas.
With your likes and comments, you give me enough energy to provide the best analysis on an ongoing basis.
And if you needed any analysis that was not on the page, you can ask me with a comment or a personal message..
Enjoy Trading... ;)
Crude Oil Remains Bearish, Looking To Retest 2023 LevelsCrude oil made only three waves up over the last few weeks, which indicates for an A-B-C correction within downtrend. It actually retraced into golden 61,8% Fibo. and 80.00 area from where market turned down and now pointing lower, possibly back to the 2023 lows if the channel is broken. So, energy can see more weakness as latest latest 4h structure looks bearish for 68 and then even for 60 area if December low is out.
a weekly price action market recap and outlook - wti crude oilGood evening and i hope you are well.
Here my commentary from last week:
The bulls got their big breakout and we made 4.65 points last week. The next obvious target is 80 where i expect sideways movement. I also don’t think we can get there without a pullback first. Target for that pb is around 76.5 - 77. We can also just trade sideways in a tighter range but i think a retest of the 2023-12 high is an obvious magnet.
Bull case: Last weeks bull case was good for Globex open on Monday and that marked the high of the week and we sold off 7.5 points. Bulls have nothing until market finds clear support and that will probably take some days. Arguments for bulls are 2 trend lines, one we already touched Friday and bounced a bit but weak arguments at best. At 70 should be big resistance but this sell off is very strong. Bulls need to keep this above 70.60 for this to be a higher low.
Bear case: Big bear surprise for me this week. But since we are at support lines and bears did not print a lower low, i lean neutral. Bears need a break below and if they can get it, chances of a measured move down rise. Target could be 65 but let’s take this one by one. First target is 70.
outlook last week: “sideways to down for a pullback but market is clearly always in long for now. so pullbacks will fail and we trade higher to at least 79.5 or 80.” → Well, pretty decent for about 2 seconds after Globex open on Monday. Big bear surprise for me. Bad outlook.
short term: Sideways to down - Market needs to find support and i doubt it’s the bull channel. Big support is probably around 70.
medium-long term: Sideways until clear break of range between 70-80
Crude OilPair : Crude Oil
Description :
Bullish Channel as an Corrective Pattern in Short Time Frame and Rejection from the Upper Trend Line. Completed " 1234 " Impulsive Waves at Fibonacci Level - 38.20% or Previous Strong Resistance. Divergence in RSI
Is Oil a Bargain or Premium Buy Right Now?Hey there, let's talk about oil and why it might be a smart move for investors like you. Right now, oil prices are in a pretty interesting spot. They're hanging out somewhere between what you'd call wholesale and retail prices.
Oil on the Market:
Think about when you buy stuff—sometimes you get it at a discount (wholesale), and sometimes you pay full price (retail). Oil prices are kind of doing the same thing. They're in a range of $76.40 to $69.10, which is more like wholesale rates, while the usual retail price is around $100.
Why It's a Good Opportunity:
This setup makes oil an attractive option, especially if you're into swing trading, where you buy low and sell high within a short timeframe. The idea is that since oil is in this middle ground, there's potential to make some gains as it moves between these price points.
What to Do:
If you're thinking about jumping in, consider starting your investment within this price range. But remember, oil markets can be pretty unpredictable, so it's important to have a plan in place and be ready for ups and downs.
The Big Question:
Now, here's where you come in. Do you see oil as a bargain, like wholesale goods, or is it more like buying something at full price? How would you approach investing in oil given the current scenario?
Share your thoughts and any charts you've got—it'll help us all understand the oil market better and maybe even make some savvy investment moves together. Drop your comments below and let's talk shop!
Crude Oil - one more bounce or going directly lower? ABC with taregt fibs on the chart in the green zone. 1.618 first and then slightly lower to the 200% fib to finish off C wave, then sharp and swift reversal. If it keeps going below this support, then opens the door to structure that points to $61. One step/level at a time.
higher prices on Crude oil (update) If prices continue to struggle going bullish after inventory
or week come in red. I expect prices to drop into mitigation and if that happens you will see an explosive move on oil.
Otherwise, they should take buy side liquidity @70.77 and come back into internal range (mitigation/volume imbalance)
Mind you, if the fed also cuts rates today that will weaken the USD and strengthen foreign currencies creating more demand for oil and short inventory reports will surge prices higher.
Crude Oil Short Looking for a wave iv, in Elliott Wave speak. Ideal target $74.70. Plan to take gains on the way down, if that's what happens here.
CL1!1.30.24 In this video I try to outline what it means for the market to expand thereby be coming more tradable. Yesterday oil had a two bar reversal to go lower... but it closed at the support area of a range box... and today it's an opening price trade to short... so it really has to start to move lower or this market should be exited with a small stop. But I prefaced the video by telling you that the market traded up to important sellers which is usually signified with a pink line from above... and so I would be waiting for this market to correct lower because at the current level the market is more controlled by sellers until it actually trades above the pink line on top. This is not the best example of a short trade but if I had taken the trade yesterday and stayed short, I still hold this trade with a small stop from yesterday. In effect, It's understandable that the market is probably going to trade lower.... but it is trading lower to the buyers because it's right at the top of a range box that is below the range box from above. I will make this more clear on a subsequent video... as I don't want to redo this video.
Crude Oil is Primed for Gamma ScalpingCrude Oil price have remained sharply range bound for the last two months. CME Group’s West Texas Intermediate (WTI) futures have traded between USD 70-80 a barrel since early November last year. Sharply shifting supply and demand outlook explains range bound trading in crude oil.
In this paper, we discuss diverging factors affecting crude oil price and illustrate gamma scalping strategy to harness returns from range bound price moves. Gamma scalping is a well-established dynamic options strategy that enables investment returns from sharply oscillating price moves.
CRUDE OIL’S DIVERGING PRICE OUTLOOK
Tailwinds powering the oil prices increase is fuelled by (a) OPEC+ members decisions on deep supply cuts, and (b) geopolitical risks in the middle east remains elevated. On the day of the conflict escalation, crude prices spiked 2.6% higher.
Some of these attacks have affected crude oil tankers in the region risking supply disruptions.
Headwinds pressing oil prices down include record US crude oil production. The US churned 13.25 million bpd (barrels per day) of oil in Q3. That is more than 3 million bpd higher than Russia (second largest producer).
EIA expects strong US production to continue through 2024 with growth driven by rising well efficiencies in US oil rigs.
Globally, crude production growth is expected to slow but still rise by 0.6 million bpd in 2024 with higher US production offsetting the decline from OPEC nations. Expectedly, this has led to a widening premium for Brent crude compared to WTI.
Demand outlook for crude oil remains uncertain. Slowdown in demand growth remains a concern. EIA forecasts global oil consumption to rise by 1.4 million bpd in 2024. This represents a slowdown in growth compared to prior years (1.9 million bpd in 2023).
Slower economic growth translates into lower crude oil consumption. As such, supply-demand dynamic may remain unchanged despite slowing production growth.
NAVIGATING DIVERGING OIL OUTLOOK
With both bullish and bearish drivers for crude oil in active play, a directional position in crude oil might not be able to provide intended hedge for adverse price move. In a market with plenty of uncertainty and characterised by oscillating prices, gamma scalping can be used to harness consistent gains.
INTRODUCTION TO GAMMA SCALPING IN CRUDE OIL
Gamma scalping is an options trading strategy in which a trader continually adjusts their holdings to profit from small price movements in the underlying, while maintaining a directionally neutral position.
Gamma scalping involves dynamic hedging by continually neutralising options delta. Delta is the value by which options prices change for every dollar change in crude oil price. Gamma is the value by which delta changes for every dollar change in crude oil price.
Gamma scalping profits from small & frequent volatility in crude oil prices regardless price direction. With gamma scalping, traders can gain from both upward and downward price moves.
ILLUSTRATING GAMMA SCALPING IN CRUDE OIL
Gamma can be scalped in multiple ways. Common among them involves establishing a long straddle which is a combination of long call and a long put using at-the-money (“ATM”) options expiring on the same date.
Hypothetically, we can follow three simple steps to set up gamma scalping:
Step 1: Buy (“Long”) ATM Call Option and Put Option (aka Long Straddle)
At the hypothetical strike price of USD 70/barrel, premiums required for buying Straddle (calls and puts at-the-money option expiring on 14/Jun 2024) is USD 12/barrel (USD 6 each for call and put) which translates to USD 12,000 per lot. At inception, the delta should be at or near zero.
In practice, delta for ATM calls and ATM puts can differ and the position may have a net non-zero delta. Investors can reference the pricing sheet on CME QuikStrike for realistic options premiums, delta values, and strikes.
The gamma of the long ~0.025 x 2 = 0.05. Gamma is the value by which delta will change for each change in crude oil price.
Long straddle at inception is delta neutral. Meaning, it does not have directional exposure. However, it has long exposure of 0.05 gamma which signals that delta will change when crude oil prices move.
Step 2: Dynamic Hedging When Crude Prices Move Higher
Consider an up-move of ten points with crude trading up at USD 80/barrel. This results in a new delta of +0.5 (due to Gamma of 0.05 and 10 point move in crude prices: 10 * 0.05 = 0.5 per barrel). This translated to delta of 500 per lot of long straddle.
To remain delta neutral, trader needs to sell 5 contracts of CME Micro WTI to balance the increased delta. As a result, the overall position now consists of:
• Long 1 x ATM call option with a strike price of USD 70, with expiry 14/June (LON24).
• Long 1 x ATM put option with a strike price of USD 70, with expiry 14/June (LON24).
• Short 5 x Micro WTI futures contract (MCLN2024) which provides exposure to 500 barrels of oil at USD 80/barrel.
Step 3: Harvesting Gains via Dynamic Hedging when Crude Prices Fall
Imagine crude oil prices fall to USD 70/barrel, new delta is -0.5 per barrel and -500 per lot of long straddle. To remain delta neutral, the trader needs to buy five lots of CME Micro WTI futures to neutralize delta once more. This results in a profit of USD 5,000 (sell at 80 and buy back at 70 per barrel; each lot of CME Micro WTI futures represents 100 barrels).
Overall position now consists of:
• Long 1 x ATM call option with a strike price of USD 70, with expiry 14/June (LON24).
• Long 1 x ATM put option with a strike price of USD 70, with expiry 14/June (LON24).
This trade can be executed multiple times repeating the same steps as above. If crude oil trades down to being with, neutralising delta would involve buying lower and then selling higher when prices recover.
SALIENT CONSIDERATIONS WHEN GAMMA SCALPING
Upfront Premiums: Long straddle requires an up-front cost. Gamma scalping will need to be executed multiple times to break even and recover the premiums. Up-front premium implies fixed downside with a well-defined maximum loss.
Dynamic Hedging: Gamma scalping requires continuous monitoring and adjusting of positions.
Time Decay: Options should be selected with sufficiently large days-to-expiry to minimize effect of time decay. Time decay of the option rise sharply closer to expiration massively shrinking the value of the long straddle.
Long Volatility: High gamma benefits from high volatility. The strategy should be utilized when volatility is expected to rise or remain high.
At Expiry: The options legs may expire at a net loss and require scalping to break-even. Example payoff analysis for different settlement prices for crude oil at expiry:
1. Settles at USD 60/barrel: The put option is US 10 in-the-money and the call option is worthless. Options P&L = USD (10 – (6+6)) x 1000 = Loss of USD 2000. Gamma scalping must have generated more than USD 2,000 to offset this potential loss.
2. Settles at USD 75/barrel: The call option expires worthless and the put option is USD 5 in-the-money. Loss of USD 7,000. Gamma scalping must generate at least USD 7,000 to break-even.
3. Settles at USD 70/barrel: The call and the put option both expire worthless; the entire up-front premium of USD 12,000 results in a loss. To break-even gamma scalping must generate at least USD 12,000.
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.
