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Fundamentals

In Monday's (October 16th) Asian session, WTI crude oil oscillated downward, and it is currently trading near $86.1/bbl. Last Friday, oil prices surged by $5, and it once rose by 6%. It was too surprising for many investors to respond as they sold way too early. Recently, oil prices have oscillated much, and any delay in trading will have different results. Last week, oil prices have oscillated significantly, and geopolitical factors are the main reason. At the beginning of the week, the market believed that the Israeli-Palestinian conflict would not have a major impact on the crude oil market. However, the crude oil fell sharply as Israel gave a 24-hour deadline, triggering concerns that the situation may escalate further, and the market was driven by risk-aversion sentiments. As a result, crude oil, gold, and the dollar have risen sharply. We have previously emphasized, that the market trade should respect the fundamentals, and investors should not keep a bearish view on oil prices. In addition, our trading should follow the direction with the least resistance. At present, the market is geographically dominated, and all the technicals will be meaningless. Nonetheless, chasing the rise is not recommended because the supply and demand remain stable, and it is not likely for WTI crude oil to change much. In the short term, we need to focus on whether the conflict is expanding again. If it does and ultimately affects the Strait of Hormuz, about 20% of the global oil supply will be threatened when the oil price will appreciate faster.

Geopolitical Views: The Israeli-Palestinian conflict has further expanded, with Israel giving a 24-hour deadline for all civilians in Gaza to evacuate the city and relocate to the south.

Focus: U.S. New York Fed Manufacturing Index for October.

Technical Analysis

WTI crude oil closed positively yesterday. It once retraced to 82.2, but surged during the European and the U.S. sessions, closing the daily chart with a long positive candle. Technically, the long positive candle turns the previous weak pattern into a bullish trend in the near term, but the dumpling tops will be founded by the oscillations at highs, and oil may retrace soon for consolidation. Despite a bullish trend, investors should not chase the appreciation, but wait until WTI crude oil descends to the key support levels. Then, investors could go long with small positions. It is important that investors should never go long before a retracement to avoid suffering a loss, and the key support below will be in the area from 85.3 to 85.8.  

Trading recommendations: Buy at lows. If WTI crude oil depreciates to 85.0, investors could go long with small positions and set the stop-loss at 84.5. To take profits, the first target will be at 87.5, where they can move the stop-loss to breakeven, and the second target should be set at 88.5.

Trading Recommendations

Trading direction: Long

Entry price: 85.000

Target price: 87.500

Stop loss: 84.500

Support: 85.000/83.800

Resistance: 87.700/89.500