فصل 28 Oil Prices Can't Fall Without an End to Conflict (10.30)
Fundamentals
During Monday's (October 30th) Asian session, WTI crude oil oscillated downwards, and it is currently trading at 83.9 dollars/bbl. Yesterday, the crude oil oscillated in the Asian session, and it pulled up quickly during the European session after getting news that the Israeli ground forces would expand the operation in Gaza, rebounding from the lowest level at 82.8 to the highest price at 85.5. We recommended going long at 83.2 last Friday, and today, WTI offers a profit of 2 dollars. Recently, due to the impact of geopolitical news, oil prices have been oscillating tremendously and showing poor continuation. In general, WTI crude oil repeated an up-and-down process every day, and a lot of investors lost direction and patience as well as the principal and trading confidence from the wash trading. However, making a good plan to trade is the key logic. Only in this way, we can fix our trading direction, and keep our trading for the far future.
Geopolitical aspects: the United Nations General Assembly emergency special session adopted a resolution calling for the immediate implementation of a lasting and sustained humanitarian truce between Israel and the Palestinian side of the conflict on September 27th, thus contributing to the cessation of hostilities. Nonetheless, the Israeli side rejected the United Nations General Assembly's call for a cease-fire between the Palestinians and Israelis resolution. According to the Israel Defense Forces spokesman, Israel expanded the size of the forces in Gaza stably into Gaza from September 27th, and there is currently no withdrawal. Therefore, Israel's ground offensive has been launched, and the war is going to expand without any signals of ceasing.
Today's focus: There is no heavy data. There will be the ADP employment data and API crude oil stock on Wednesday, and the Initial Jobless Claims, the EIA crude oil stock, the Fed's rate hike resolution, and Powell's monetary policy meeting on Thursday to be considered. Besides, the U.S. unemployment rate for October and the Nonfarm Payrolls data (Seasonal adjusted) on Friday are also worth watching. Most importantly, the development in the Middle East situation.
Technical Analysis
WTI crude oil surged to 85.5 last Friday and closed the daily chart with a big bullish candle. It oscillated incredibly last week with substantial ups and downs (affected by the Middle East). Currently, the over-pricing risks are released greatly and there is little change in fundamentals. After the geopolitical risks, the low inventory will support crude oil for the rest of the year. Nevertheless, the market is trading a surplus expectation after the ending of OPEC+'s production cut next year. Moreover, the current high price suppresses the oil demand, and the fundamentals tend to weaken in the middle- and long- term. But there isn't any instruction shortly, and we should follow the short-term trading logic to trade quickly. As the market is guided by the Israeli-Palestinian conflict, the risk-aversion will not fade until an improvement emerges. At present, the conflict is expected to escalate, and other oil-producing countries in the Middle East will probably participate, indicating a possible appreciation in WTI crude oil. Therefore, the best trading direction is to trade the small stop-loss with a small position at lows and go long. Be ready to take profits partially and stop being greedy, it is important to protect the profits.
Today's trading recommendations: Buy at lows. If WTI retraced back to 83.2, try to go long with small positions and set the stop-loss at 82.7. To take profits, the first target will be at 85.7, where investors can reduce the position size and move the stop-loss to breakeven, and put the second target at 86.8. If WTI plummets to 81.8 again, investors should enter and go long, and stop loss by 0.5 dollars. The target to take profits is the same as the first target above.
Trading Recommendations
Trading direction: Long
Entry price: 83.200
Target price: 85.700
Stop loss: 82.700
Support: 82.800/81.800
Resistance: 85.500/86.500
