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Fundamentals

In Friday's (October 20th) Asian session, WTI crude oil oscillated narrowly, and it is currently trading at $89.0/bbl. Yesterday, WTI crude oil rebounded from lows (once touched 85.3), and it was in line with our expectations about the low prices. Investors who follow our instructions should have cashed in profits by $3, and those who go short at 88.3 the day before yesterday, could exist at 85.3 by earning $3. Thus, $6 was the margin for the past two days. We also explained that the oscillation is a result of the current situation, and investors should wait for a chance to buy low and sell high, instead of chasing the trend. The rise in oil prices yesterday was affected by the growing Middle East situation and the de-stocking. However, the Department of Energy will not sit still and planned to recover the stock by 6 million barrels for the SPR. Therefore, a retracement may emerge in the hourly chart today when investors could buy in long positions.

News: The U.S. Department of Energy said Thursday that it wants to buy 6 million barrels of crude oil to replenish the SPR, by delivering 3 million barrels in December and 3 million barrels in January next year while continuing its program to replenish the Emergency Reserve.

Macro: Fed Chairman Powell demonstrated that inflation is still too high and the road to fighting it could be rocky and take some time, and that the Fed is committed to bringing inflation down to 2% on a sustainable basis. To reach this goal, it may take a period of below-trend economic growth, as well as further weakness in labor market conditions. Additionally, Powell noted that rising yields in the bond market may mean that more rate hikes are not necessary.

Today's Focus: No important data, focusing on situations in the Middle East.

Technical Analysis

Yesterday, WTI once depreciated to 85.3 after a little decline, and rebounded tremendously to 89.4 by $4. Besides, the candlestick chart closed positively with a long-lower-shadow, and the daily chart has crossed through the key resistance level now at the middle band. Furthermore, the MACD has formed a golden cross, and it will probably test the upper band. Meanwhile, the bullish momentum from the 4H chart is releasing, but WTI is consolidating at the 1H chart. Thus, a consolidation will appear in the hourly chart, and WTI crude oil should restart the appreciation in the U.S. session.  

Trading recommendations: Buy low and sell high. If WTI crude oil depreciates to 86.3, investors could go long with small positions and set the stop-loss at 85.8. To take profits, the first target will be at 89.3, where they can reduce the position size and move the stop-loss to breakeven, and the second target should be set at 90.3. Comparingly, if WTI crude oil rebounds to 90.3, investors could go short with small positions and set the stop-loss at 90.8. To take profits, the first target will be at 88.3, where they can reduce the position size and move the stop-loss to breakeven, and the second target should be set at 86.3.

Trading Recommendations

Trading direction: Long

Entry price: 86.300

Target price: 88.300

Stop loss: 85.800

Support: 86.300/85.300

Resistance: 88.500/89.500