Where Does WTI Crude Oil Go From Here?

Posted Wednesday, August 2, 2017 by
Dave Green • 2 min read

Tuesday’s brief on WTI Crude oil futures has proved to be fairly accurate, as compression has dominated today’s trade. So, where do we go from here?

Well, the holding pattern is about over. Now it is time to identify potential launch points to our next value area.

Daily WTI Crude OilSeptember WTI Crude Oil Futures-Daily Compression

WTI Crude is currently trading inside of yesterday’s range around the $49.50 area. The key technicals of $50.00 and $48.51 have proved relevant. This is a great sign because the next trade will involve a departure from this zone.

No doubt, the area between $50.00 and the swing high of $50.43 will provide robust participation. But the area under today's low of $48.55 is likely to be the catalyst for a dramatic sell-off.

Let’s look at both scenarios:

  • A breakout to the bull will be hard fought and will take some time to develop. I will be looking for multiple-session consolidation in the $50.00-$50.43 range before playing a long trade. An immediate failure above $50.50 will encourage a long entry at a retracement level. Stay tuned.

  • The short under today’s and Tuesday’s session lows is much more attractive. A sell under $48.55 is likely to test 50% of the current wave on the daily chart, $47.92.

  • Today’s close is huge for both scenarios as we still have symmetry on the daily chart. The short will be under today’s session close, with a stop above the high and take profit the 50% level of $47.92. As of now, this is around a 1.5:1 payoff.

Crude saw heavy volumes on the API oil stocks data and this morning’s EIA inventories release. Yesterday’s API report came in way ahead of last week’s report, and today’s EIA data beat analysts expectations.

However, whipsaw action has thus far dominated crude oil for the U.S. session. With lively trading and a valid compression area, I am confident that we will see a directional move soon.

Bottom Line: The long trade is going to take the rest of the week to confirm. On the flip side, an immediate short trade scenario is attractive. With any luck, it will come our way sometime during tomorrow's electronic session.

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