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Fundamentals

During Thursday's (October 26th) Asian session, WTI crude oil oscillated narrowly, and it is currently trading at $85.1/bbl. Yesterday, a deep reversal took place in the oil market, and the wash trading was smooth, investors who traded without planning suffered more. The wash trading was caused by the cool down of the geopolitical conflict and the accumulation of oil stocks, and the CM cut down the price to 81.9. After that, WTI rebounded quickly to 85 and recovered all the losses of yesterday. With any changes in fundamentals, going short is not possible at the moment. Although the conflicts cool down, headlines come out continuously, and investors are nervous because they don't know when will the WTI be shocked again. Moreover, the market yesterday was a trap for those who chase the trend, and the key to trade is always patience! We should never expect to trade everything in one day, as trade is a job when it is necessary. If the market is not suitable, or the fundamentals do not support, we should wait without holding any positions. Trading is not for once, otherwise, the pay back rate will be even higher than in Macau. Therefore, if we want to keep trading, maintaining a stable strategy is essential, and we should plan and respect our trade every time.  

Inventories: The EIA data demonstrates that U.S. crude oil inventories were 1.371 million barrels as of the week of October 20th, while the expected number was 239,000 barrels and the previous number was 4.491 million barrels less. Cushing, Oklahoma crude oil inventories were 213,000 barrels, and the previous number was 758,000 barrels less. In addition, U.S. EIA Gasoline Inventories were 156,000 barrels in the same week, the expected number -897,000 barrels, and the previous number was 2.37 million barrels less. Refined Oil Inventories were -1.686 million barrels, while the expected number was 1.168 million barrels lower and the previous number was 3.185 million barrels less.  

Geopolitical: Israel agreed to temporarily delay a ground attack on Gaza pending the deployment of a U.S. missile defense system.

Today's focus: U.S. Initial Jobless Claims, the Real Personal Consumption Expenditures Monthly Rate, September Durable Goods Orders Monthly Rate, the Third Quarter GDP, Core PCE Price Index Annualized Rate, and the Existing Home Sales Monthly/Annualized Rate.

Technical Analysis

WTI crude oil plunged yesterday. In the U.S. and European Session, the unfavorable data had dragged the oil price once to 81.9. Nonetheless, it wasn't the low inventory, but the geopolitical issues that guided the oil prices. Although we saw a decline yesterday, it is a potential threat in the end. After closing with a long-lower-shadow, oil prices rebounded and recovered the loss yesterday. We mentioned that it is better to buy low and sell high, and the depreciation yesterday offered us a good chance to build positions. Now, WTI crude oil is still running in a channel, but we need to consider the support at 84.3 below and the resistance at 86.3 above. Leading by the news, the technical analysis is powerless and makes it harder to trade. Anyway, the main logic is clear, that tremendous oscillations will bring better opportunities, and a better profit/loss ratio is what we are looking for. So, stop participating in trades that are not profitable.  

Today's trading recommendations: Buy at lows. If WTI returns back to $68.2, try to go long with small positions and set the stop-loss at $66.7. To take profits, the first target will be at 86.3, where investors can reduce the position size and move the stop-loss to breakeven, and put the second target at 88.3. If WTI plummets to 82.8 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: 84.100

Target price: 86.300

Stop loss: 83.600

Support: 82.700/80.600

Resistance: 86.300/88.300