March WTI crude oil futures gave us quite the head fake after last week’s futures cast! At that time, the crude market looked like it was ready to break out of its 54.00 to 52.00 range after breaking above trend line resistance. As expected from my previous crude futures cast post, price did come back to retest that broken trend line resistance, now as support, into the 53.00 handle, but extended its decline a bit further to re-test the confluence of supportive technical indicators just above the 52.00 area. The decline extended a bit further than I anticipated, but failed to break below the key prior lows at 51.72 from January 18th. With the recent move back to test the 54.00 resistance area, crude remains in a tight range and is building potential energy for a move one way or another.
From a technical perspective, recent price action is looking more constructive to the upside, as it has begun to make a series of higher highs, and higher lows with each turn to the upside. I am still expecting WTI crude futures are forming a base above 52.00, with upside projections from this range still into the 58.74 area. With every minute this market remains in this tight range, more and more stops will build in the market, likely resting above prior highs and below prior lows. These stops will be the fuel for a move in either direction, and as soon as they begin to trigger, the flood of market orders that follow from such events is an instant spark to volatility!
This week’s EIA Petroleum Status Report (from 2/1/2017) saw a significant build in crude oil inventories of 6.5 M barrels, compared to a 2.8 M barrel build in the prior report. This was largely ignored by the market, as price has remained relatively well bid, suggesting its possible demand expectations have risen or the increased supply on hand has already been priced into the market. It will be important for traders to continue to monitor news headlines for multiple geo-political events, i.e. the new Trump administrations renegotiation of trade deals with Mexico (tied for 9th/10th largest oil producer with Iraq!), Iranian missile test, and any other turbulence with oil producing nations.
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Market Strategist II
Dan started his career as an arbitrage clerk in the Euro Dollar pit on the floor of the CME. After graduating from the University of Notre Dame, he leveraged his computer science background and started his trading career developing both automate and discretionary trading systems. Dan has spent the last 5 years trading his own account, concentrating primarily in the currency and grains markets. Most recently he has joined RJO Futures as a Market Strategist.