When You Are Trading Crude Oil, Timing Is Everything!

When you are trading crude oil the clock is always ticking. A trade’s entry, exit, and ensuing price action are all functions of time. Thursday’s WTI crude oil futures morning outlook provided a decent setup to play a washout. There was a defined support zone, session low, and a secondary round number to signal a short entry. Alas, the bulls dominated intraday action for Thursday, leaving the trade un-elected.

Today’s session has shown a definitive break to the bear and a possible shift in short-term sentiment. Kudos to all that took a few bucks out of the market on the sell-off.

Technicals

November WTI crude oil futures are trading with ferocity, posting over 350,000 contracts for the session.

November WTI Crude Oil Futures, Daily Chart

It is getting to be a bit redundant, but I am a big fan of converging indicators. The defined support zone of yesterday has been violated, and transitions to resistance. A few observations:

• Trade is now firmly beneath the daily SMA.

• There is a pending Bollinger Band MP/SMA crossover.

• We have seen intraday compression around the 62% retracement of September’s range.

• Convergence of the SMA, psyche level of $50.00, Bollinger MP and 20 Day EMA produces heavy resistance at $50.31-$50.00.

• 78% retracement of September’s range is formidable support at $48.59.

Bottom Line: The plan for trading November WTI crude oil futures is fairly straightforward. Sell the resistance zone buy the 78% retracement.

Trade management is another issue altogether. As of now, this is a trend day down. Taking any longs is high-risk and should be treated with care. A 1:1 R/R scalping method from $48.59 with modest profit targets is the best way to go.

In the unlikely event that a short of $50.00 comes into play, this is a great spot to take a position looking for a 2:1 or 3:1 R/R.

As always, play it 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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