If you view my last published chart you can get a fairly clear view of the sideways consolidation that I'm expecting to continue in the coming weeks, in a 45.6-50.4 range, the main trading meat being 46.81-49.18. This range is based on major Supply and Demand (2009 Rally) levels during what I consider Fair Value oil prior to the US initiating QE following the 2008 financial crisis. Oil prices have swung 'around' this range for the past 2 years and I've been (im)patiently waiting for extended consolidation in this range around it's long term critical midpoint of 48 in hopes to see a repeat performance of the July 2015 swing around 48 and then 10 dollar drop down to 38.X; and it appears that this may be culminating.
Tim Cook has stated that the electronic transportation is not the future, it is here. Elon Musk is working towards production of 10,000 Model 3's per week by the end of 2018, his more affordable version of the Model S. Lets face it, OPEC has not come through and the battle for market share will likely continue in the years to come and we've seen that the 50 dollar level is again contending for a supply/selling level for at least the mid term and I can't help but wonder whether 2018 will be the year of 38-48 dollar oil?
This is a risky entry as we saw an unexpected monster rally on Friday, although still within my sideways range and just breaching the supply/selling zone on the October contract. This chart is a bit unorthodox for me using channel lines and mainly looking at previous cluster/range levels and channel lines vs, my typical supply/demand inflections which I am a firm believer in. You can zoom out or scroll left to get a better view of the overall ranges and structures that I am looking for prices to repeat.
SL is difficult on this, I have a nice buffer built following my stagger chart, see "Oil - Possible Sideways Range' and so am willing to keep a bit deeper stop than what typically risk management would call for as I am continually using smaller staggers into and out of my larger position move, which has proven very beneficial in increasing overall ticks in the position trade.
I will describe in subsequent updates why the 47.04 -38.01 levels are pertinent to 2009. Please let me know if you have any questions or comments.
The Trade:
Short Entry: Active: 48.8-49.6 TP1 or Average Down Level: 41.00 TP2: 38.00-39.00
Good trading all!
Komen
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Please review this chart and details/updates to better understand the sideways view that I have and its pertinence to 2009 major weekly inflections.
Dagangan ditutup: hentian tercapai
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Closing this out as it's peeked out a bit too far. I encourage you to continue watching the Oil - Possible sideways range I published, shown here as I believe prices may travel the majority of the entire range again; if... prices break down over the next trading week.
Thanks for posting. How many weeks do you see it trading sideways? I fully expect the price to fall and at least retest the previous low of $42.54 or lower in the coming weeks. Even though there is talk of backwardation the OECD level is still very much over supplied. Until this is over supply begins to clear with further OPEC intervention I can't see the price recovering. The only caveat being Venezuela going bankrupt this fall. If that doesn't happen then I believe we have to see more oil companies go bankrupt to cause complete price destruction. The world economy is slowing down much to the consternation of central banks. Debt rising and GDP to earnings rising also to astronomical levels. There is no way to fight demographics which is the cause of this bust and the two previous. Central banks and consumers will be running out of credit to fuel the economic resurgence. All really depressing stuff but the future of EV awaits and hopefully better times ahead, but for now changes are happening.
smitheric1970
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@Cheflorraine, I agree, it is a very scary situation; 2 years ago I was very doom and gloom towards world economies and was looking for 17-22 oil heading into the complete price destruction that you mentioned. I believe the cycle down will continue and who knows whether that is a year or 10 years away but it does unfortunately seem imminent. Regarding the current sideways, that is a difficult call; I've been looking at the extended range from May/June 2015 which has several 3 dollar swings over 2-3 day periods and the overall distribution range lasted for 2 months, that was of course during a different period of unknown rate hikes and hope in OPEC... or was it so different... Anyways, no guess on the sideways time period but we do have seasonality pressure approaching, potential US rate hikes end of year and next, OPEC in Austria on November 30 (I can't imagine sideways for that long); but my current thoughts are for maybe another 4 weeks in the 45.6-50.37 range? Possibly?
Thanks so much for your post and I'm interested in your continued comments!
smitheric1970
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@Cheflorraine, Here is a structural comparison to the May/June 2015 range I mentioned. Just an observation as we may see a few more weeks of this sideways action. And with continued oversupply, potential 2018 rate hikes and the continued battle for market share, I am expecting distribution.
@smitheric1970, Hi ! Did your change vision in connection with the events in Korea, the hurricane and so on ?
smitheric1970
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@iqs, No changes, I am still trading the 'sideways oil' chart shown above (45.62-50.37), if we break above that range and/or if the N Korea situation escalates then I'll reassess; if we break below then i'll look for this larger breakdown towards 38. But for now, the Sideways chart is still active.
smitheric1970
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@iqs, Note that on the 'Sideways Oil" chart, I am currently in a long model.