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Fundamentals

During the Asian session on Wednesday (October 25), WTI crude oil showed a one-way move downward and is currently trading around 83.3 dollars per barrel. Oil prices fell sharply yesterday, mainly because the Palestinian-Israeli conflict has not further intensified, and risk aversion has cooled rapidly. Coupled with the unexpected weakening of European economic data, recession expectations have resumed. Yesterday, we also stressed the need to focus on the present and try to go short in the bearish trend. At present, the Palestinian-Israeli conflict has a short-term cooling need, which is also expected. It is different from the Russian-Ukrainian conflict, in the face of humanitarianism, Israel is more unhelpful. The diplomatic approach may be the trend, but short-term conflicts are inevitable. Strategy should still be emphasized, but there is no need to exaggerate the impact of the Palestinian-Israeli conflict on oil prices. As long as there are no spillovers to oil-producing countries, the impact will be limited. Due to the risk premium pullback, the market also ignored the reality that API crude oil continued to cut inventories sharply in the early morning. Given that the current premium risk is also easing significantly, the fundamental tone is still to reduce production and cut inventories. It should be emphasized here that the retracement of the current position may have been sufficient. On the one hand, the current supply and demand are still biased towards bullishness. On the other hand, no one knows whether the situation will get out of control.  

Inventories: In the week ended October 20, US API crude inventories were -2.668 million barrels, compared with the expected 1.55 million barrels. Also, US API gasoline inventories were -4.169 million barrels, compared with the expected -1.7 million barrels.

Investors should pay attention to EIA crude oil and gasoline inventory data, as well as developments in the Middle East.  

Technical Analysis

Oil prices fell sharply yesterday, which have fallen as low as 82.7 in the Eurozone and US sessions. The price finally closed a full bear candle. In the hourly chart, oil prices may rebound at the hourly level due to the golden cross of the 1-hour MACD. However, as the bearish momentum of the 4-hour MACD was also released to its limit yesterday, investors are not recommended to take more short positions. In the end, the daily chart closed with a long bear candle, which was also 3 Days of depreciation. At the moment, market sentiment is weak, and inertia during the day is bearish. Besides, as the current oil price is on the lower edge of the triangular cone, it is not suitable for traders to go short excessively. If the hourly rebound exceeds 84.5, oil prices may be able to hold up and the daily chart will also rebound.

It is recommended that investors mainly go long at low. If the oil price retraces largely to 82.7, you can go long with small positions. The stop loss is set at 82.2, the first target to take profit is 85.2, where you can reduce your positions and move the stop loss to break even, and the second is 86.8.

Trading Recommendations

Trading Direction: Long

Entry Price: 82.700

Target Price: 86.800

Stop Loss: 82.200

Support: 82.700/80.600

Resistance: 86.800/88.300