WTI Crude Oil Outlook: October 5, 2017

It has been a running theme for the past 36 hours, but WTI crude oil has entered a consolidation phase. Price is rotating vigorously around the key psychological level of $50.00. Under heavy volumes, November WTI crude is poised for a breakout.

The support zone that I outlined yesterday is showing its validity once again. Having tightened in range, this area is setting up to be a make-or-break area for crude oil pricing.

Technicals

Heavy volumes should be the rule for today’s U.S. session WTI crude trade. During the overnight, November crude oil futures posted a traded volume of nearly 150,000 contracts. I expect more of the same throughout today’s session.

November WTI Crude Oil Futures, Daily Chart

Thus far, the trading range is a tight 43 ticks. An extension is all but assured. Here are a few levels to be aware of:

• Daily SMA at $49.86

• The convergence of indicators from $50.34-$49.86

• Wednesday’s low of $49.76

• 62% Fibonacci retracement at $49.48

Bottom Line: This market is poised to fall apart under yesterday’s session low of $49.76. Scalping breakout shorts from $49.75 is a high probability trade. Tight management, 1:1 R/R looking for 5-15 ticks.

From a position standpoint, if trade goes beneath this level, we should see $49.48 in short order. The key here is to align risk and reward. An entry of $49.75 gives a stop above $50.00 and a take profit of $49.48.

A long-term position strategy may be taken from this level as well. It is a higher risk, as the stop should be above today’s current intraday high upon election. Looking for a downside of $49.00 or $48.50 are reasonable targets for a swing trade.

In the event that price rotates towards the bull, we will be in a position to re-evaluate moving into Friday's session.

As always, trade smart and for tomorrow!

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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