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!