Learn To Trade Commodity Overview 18th August
Focus on Oil
The Oil market has deteriorated rapidly over the last week with the market seeing a $8 drop. This price drop was also mirrored by declining equity market.
Thoughts from the trading floor
The technical perspective appears bearish in the short term, with the intense sell-off forcing out any remaining buyers from the previous week’s upward breakout. The market does appear to have found some temporary support at $74.86 to $75.21. However with such strong downward pressure and momentum indicators firmly supporting sellers there is scope for additional declines. If $74.86 breaks the next key level lies at $74.50, worst case scenario would be a full decline to July’s low of $71.09. This level is expected to be meet by strong buying. Buyers have a lot of work to be done and they are unlikely to regain any ground above $79.38. It appears likely that there will be a small consolidation period in the market and the potential for a continuation pattern. This range is likely to build between $74.86 and $76.77
Last night the American Petroleum Institute reported that US oil inventories posted a gain of 5866K barrels last week. This compares to the analyst estimate for the DOE number of -2988K barrels. The API gasoline also rose 2026K as opposed to the estimate for the DOE number of 409K. With such a large discrepancy between the DOE estimates and the API number we expect the DOE release today to show a number outside of its expected range and provide a good trading opportunity.
The equity markets will once again take dominance over Oil market direction, as all eyes will be looking to see if global economies can continue to recover. Equity markets are entering a pivotal time where current outlooks and recent US economic data remain mixed. If equities rise it is a clear sign the economy could be still expanding, leading to increased demand. This would lead to a dollar decline. The fall of the dollar makes dollar-denominated crude cheaper for many buyers, primary supporting the market. However if the ‘double-dip’ scenario plays out many analysts predict a possible $65 target by the end of the year.
Bull View
Bulls will be picking up the pieces of their recent defeat and will try and look for support above $74.86. If achieved they will be looking to claw back recent losses to a more stable support price region of $76.50, where they can recapture some fallen territory.
Bear View
Bears completely rejected the previous drive up to $83.98; this full reversal has left the ball firmly in their court. They will be looking to press home the advantage and trigger a deeper sell-off; confirmation of this lies in the break of $74.86.
Futex View
We believe that there will be a period of consolidation in the market, this could either set up a level of support and a value area being built, but after such a sharp aggressive sell-off we do not support a bullish outlook. Instead we will be looking for the potential forming of a consolidation pattern break to act as sell trigger for a possible deeper dip.
Tags: Commodity, futex, learn to trade, market profile
