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!