WTI Crude Is Becoming Compressed: When Will It Break?

Posted Wednesday, October 4, 2017 by
Shain Vernier • 1 min read

The concept of “compression” and its applications to the markets are an interesting point of study. Simply put, as a market tightens, it builds energy. When the energy is released, price moves directionally with velocity. Currently, WTI crude oil is becoming compressed.

The phenomenon of compression is often referred to as tightening, consolidation, or in some cases rotation. Let’s take a look at how we can trade WTI crude effectively according to this principle.



Yesterday, I outlined a probable support zone. The last 24 hours or so have shown this zone to be valid.


CL Daily ChartNovember WTI Crude Oil Futures, Daily Chart

Important elements of compression are robust participation and a decreasing trading range. Thus far today we have seen both.

Moving forward, here the key levels to be aware of facing November WTI crude oil futures:

  • 20 Day EMA: $50.44

  • Bollinger MP: $50.19

  • 50% Retracement: $50.13

  • Psyche Level: $50.00

  • Daily SMA: $49.71

  • 62% Retracement: $49.48

It is evident that the $50.00 level is bringing participation to the market. Our support zone of $50.44 to $49.71 is holding bears in check. Price action is choppy within this range.

Bottom Line: Longs from the bottom of the support zone at $49.76 to $49.71 are good entries to play further consolidation for the rest of the U.S. session. A stop below $49.48 will give this trade a chance to succeed at 1:1 R/R. In addition, a tighter scalping plan is likely to be successful, as this area should produce positive price action.

Today’s close will be crucial to the rest of the week’s trade. If our range remains at current levels, I will be looking to take a position long above today’s session high during the overnight hours. Stay tuned, and trade smart!

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