Wednesday, April 20, 2016

Crude Oil Market Recap

I could not find any valuable trade since several days. There are sometimes such times in which I analyze the market and don't get the story, lol. It's a good idea to take a nice break from trading in these times or the market would try to heartbreak the trader if you know what I mean. I've learned my lessons in the lovely past. Anyway, today was a great day in Crude Oil. We had a knee-jerk move to the north and I took the opportunity to participate in this trip to the Mount Everest, so I thought to write a post about it.

Firstly and foremost, it's the settlement day for the May contract (expires today). At Monday the volume has rolled over to the June contract already. That said, since Monday I looking at the June contract.

Next thing is the COT report as I like to see what the managing money sector done in the previous week and maybe the numbers are of some help for you as well. ICE Europe and NYMEX as well as Options and Futures combined, Money Managers were net buying 27,635 contracts of WTI Crude oil in which short covering has dominated the flow with 24,173 contracts, in the week endend April 12.

Let's move our eyes to the weekly US Dollar Index chart. We are still testing the mentioned macro balance area low which seem to support Crude oil in some degree. The previous week was a ouside bar (previous week's high and low got taken out) which could indicate change in the market context due to the macro braket low, I guess.

For the sake of diversification let's employ a bottom up analysis process today. With that said and looking at the daily profiles (ETH/Globex), we can identify Tuesday's double distribution volume profile with an unsecured low. This profile type is quite tricky to trade sometimes but the brave secret here is to split the profile. I will elaborate what I mean with this in the next paragraph, patience please. With looking at the current profile, we opened (ETH/Globex) in the upper distribution but below the VPOC (Volume Point of Control). The market did not test that VPOC in the overnight session and quickly tested the ETH value area close level to find some balance there but continued its exploration in the lower distribution. Notice that we never broke the distribution low in this lower area. In the end and with help of the Crude oil inventoires the market gone vertical.

How to trade this thing with a split now? Simple, look at the following screenshot:

As you can see with the split you have two profiles to conclude your scenarios and more levels to trade from. As the market opened with a open drive (open level in such cases highly potential area to revisit) in the combination with the untouched naked VPOC it made the most sense for me to take a trade from that lower VVAL level in the U.S session with a stop location below the distribution low. Sure, to hold a trade during the inventories is not the best idea but let's avoid to be pussy-whipped. Anyway, in this case the golden luck was on my side although my target was that mentioned naked VPOC level, so I missed more than 50% of this upside move.

Moving forward to the weekly profiles in order to identify some confluent levels, we can observe support from the previous week's VVAL close level and it seems the low volume area were enough filled with volume in this week. Also, to mention is the VPOC in the lower distribution.

Last but not least, the monthly profile. With looking at this, you can quickly identify the previous month's TPO acceptance area and its supportive lower level:

In summary the marekt offered some nice levels that were confluent with our intra-day trading location.

With all that said, I hope you had a great day! Stay happy.

Sunday, April 3, 2016

Crude Oil Market Observations

Unfortunately, last week I missed posting my pre-analysis on Crude oil. However, heading to the next week I wrote my thoughts and observations on this market, first going through the plain charts and then through the volume profiles. It's a good idea to begin with the Commitments of Traders Report today.

Looking at this COT report, we can see that the Managed Money section were net sellers of 15,892 contracts of WTI Crude oil (NYMEX, ICE and Options, Futures combined) with selling of 13,210 contracts and a long liquidation of 2,682 contracts in the week ended March 29.

Here a screenshot for you:

The US Dollar Index is one time framing lower on the daily perspective. At the same time we are testing the macro balance area low currently. I will closely observe this lower macro balance extreme as we could see some support here. Try to study the US Dollar with Crude Oil for a better market feeling.

Ok, let's dig into Crude oil now. We start off with the plain monthly timeframe. Looking at this timeframe, we can observe that February's high got taken out. The one time framing lower behavior that occured for several months ended. So, we are currently in balanced state. However, it seems like there were some selling going on into this upside move because of the candle's reaction in March.

Looking now at the monthly volume profile, we can see that the market opened inside of the previous value close area but quickly moved lower to test the TPO single print. Guess, I mentioned this low volume area in my video analysis as possible location to fill up with volume. In my opinon we could see some rotational behavior between the two major distributions in order to fill this area with volume before the market decides its direction. It depends on the open, but I have a more bullish feeling with possible resitance at the previous VVAL close level. My bullish feeling is declared because of the unsecured high in March as a possible area to revisit.

Moving forward to the weekly timeframe, we can see a clean break lower. With this a move lower to test the marked balance area low (bracket low) is possible.

Now looking at the weekly volume profile chart, we can straight identify a poor low and a poor high as possible areas to revisit. The NPOC could be also a posible level to be cleared. Based on the previous week's close, we could see some lower prices to clear the NPOC followed by support at the same level.

In the daily timeframe we are one time framing lower. Firday leaved us with an unsecured high and a b shaped profile. Again it depends where the market will open tomorrow to conclude a better scenario. A open inside of value would be handled as rotational/bearish with resitance at VVPOC/VVAL. A break above these metnioned levels should bring the market to higher prices in my opinion.

In summary, there is quite some conflicting information here. But as said the open will bring some light into all this. Keep it simple and stay focused.