WTI Bloodbath on the Horizon?
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Fundamentals:
The Dollar has been on a steady rise since Mid April. Currently it is in consolidation and is poised to resume its upside trend due to various factors such as USD repatriation, higher Interest Rates and crises in EM currencies.
USOIL is closely correlated with the dollar. With a lag of c.a. 1 Month oil has peaked, reversed, and just yesterday violated an upward trend which has been in play since August 2017.
Investors are record long the Euro vs. the USD. In addition Oil has the largest speculative long position of all time- should oil continue to decline, an unwind of mentioned positions would prove to be a further catalyst to the downside.
If the dollar resumes its ascent, oil will continue its decline.
Technicals:
Check out the monthly chart and you will see a line that served as resistance back in 2005 and support in 2010. We have just hit that strong support/ resistance level from the bottom and reversed.
The Monthly DeMark indicator shows a 9 Sell Setup coinciding exactly with mentioned resistance, a weekly sell 13' (Combo, sequential and aggressive), and an imperfect 9 sell on the daily- all of this in the last 2 weeks.
In addition, oil has formed a H&S top providing us with a price target of $61 within the next month.
Should this H&S top be completed an increased probability of another, bigger H&S top leading us back to $50 Oil exists.
This price development would be in line with the recent possible peak in the business cycle. (ISM high in February, peak employment).
Dangers to this thesis:
1. ISM PMI has increased slightly in June (but nothing ever goes up or down in a straight line)
2. DXY is in consolidation and could take some time to cross critical resistance at 94,90
3. Geopolitical developments and risk of military intervention contra Iran can support oil prices.
4. A recent increase in the Brent/ WTI spread (End of May) opens the possibility of WTI being mispriced to the downside.
Good Luck!
The Dollar has been on a steady rise since Mid April. Currently it is in consolidation and is poised to resume its upside trend due to various factors such as USD repatriation, higher Interest Rates and crises in EM currencies.
USOIL is closely correlated with the dollar. With a lag of c.a. 1 Month oil has peaked, reversed, and just yesterday violated an upward trend which has been in play since August 2017.
Investors are record long the Euro vs. the USD. In addition Oil has the largest speculative long position of all time- should oil continue to decline, an unwind of mentioned positions would prove to be a further catalyst to the downside.
If the dollar resumes its ascent, oil will continue its decline.
Technicals:
Check out the monthly chart and you will see a line that served as resistance back in 2005 and support in 2010. We have just hit that strong support/ resistance level from the bottom and reversed.
The Monthly DeMark indicator shows a 9 Sell Setup coinciding exactly with mentioned resistance, a weekly sell 13' (Combo, sequential and aggressive), and an imperfect 9 sell on the daily- all of this in the last 2 weeks.
In addition, oil has formed a H&S top providing us with a price target of $61 within the next month.
Should this H&S top be completed an increased probability of another, bigger H&S top leading us back to $50 Oil exists.
This price development would be in line with the recent possible peak in the business cycle. (ISM high in February, peak employment).
Dangers to this thesis:
1. ISM PMI has increased slightly in June (but nothing ever goes up or down in a straight line)
2. DXY is in consolidation and could take some time to cross critical resistance at 94,90
3. Geopolitical developments and risk of military intervention contra Iran can support oil prices.
4. A recent increase in the Brent/ WTI spread (End of May) opens the possibility of WTI being mispriced to the downside.
Good Luck!
Bình luận
Looks like the trade is going in our direction although I see an increased probability of consolidation for the rest of the week starting tomorrow. Likely continuation is next week.Bình luận
The coming days might provide an attractive opportunity to get into the trade in case you missed the entry.
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