WTI Crude Oil Trading Levels- $50.00 On The Horizon

In the earlier update, I outlined the looming danger of Hurricane Irma towards the U.S. equities indices. The impact is also evident in the WTI crude oil futures market. Concerns over prolonged disruption of production in the Gulf of Mexico seem to be driving prices higher.

As of this writing, October WTI crude oil futures are trading in the neighborhood of $49.25. Let’s take a look under the hood and see if we can find a few trade ideas for the latter half of today’s U.S. session.

WTI Outlook

WTI crude has been strong in the wake of Hurricane Harvey. Reports from yesterday cited about 50% of crude oil production has resumed in the Gulf Coast region. While this is a step in the right direction, it may be fleeting. Category 5 Irma threatens to upset the apple cart once again.

October WTI Crude Oil Futures, Daily Chart

First, a few technical levels:

• Key psyche level of $50.00

• Upper BB $49.53

• 78% Fibonacci retracement of August’s range $49.43

• 13 Day SMA at $48.09

Be sure to note the changes in times for this week’s inventory cycle:

• API Crude Oil Stock: Today, 4:30 PM EST

• EIA Crude Oil Stock: Thursday, 11:00 AM EST?

Overview: Make no mistake, this market is trending higher. Fundamentals have the bulls in control, and I am looking for a test of $50.00 either today or tomorrow. At the moment, my bias is definitely to the long side.

Trade Ideas: There are some potential short trade entries on the board for October WTI crude futures:

• Short from resistance zone of $49.43 to $49.53.

This trade should be viewed as a tight scalp, looking for a 1:1 ratio with a max risk of 25 ticks.  A position long from this level is off the table for me until I see where we close for today.

I will be looking to take the following long trades in October WTI:

• Buys from the 38% retracement of the intraday range (high to low). 1:1 R/R

• Position long from the 13 Day SMA $48.09. More than likely out of the picture for today, but on tomorrow’s open a real possibility. Looking for 1:2 or 1:3 risk/reward payoff.

This is a conservative trading plan, but caution can be good. Until we see exactly what Irma is going to bring, I recommend tight money management and limited assumed risk.