Rising Crude Oil Production Weights on Prices

The holiday week has been a big one for the energies markets. An epic slide to $50.50 for January WTI crude oil and nearly unprecedented trading volumes for December natural gas futures has highlighted the action.

On the 14 November, December natural gas futures rapidly broke to the bull by 20%. The move quickly wiped out many traders on the short side of the market. One options trading firm based in Florida went bankrupt during the rally, with the CEO calling it “unlike anything he’d ever seen.” Since 14 November, natural gas has given back a portion of the gains with price remaining strong.

WTI crude oil has fallen out of bed amid a supply glut and investment banks calling for global oil prices to plunge. In the last few days, JP Morgan adjusted their 2019 outlook for Brent crude to $73 per barrel, down from $83.50. A decrease in global economic growth and lagging demand is being attributed for the downgrade.

As traders, it is up to us to periodically take a step back and evaluate the big picture. At the moment, we have weakness in stocks, a hawkish FED, and slumping oil prices. Add it all up ― 2019 is beginning to look like a “corrective” year for global economic growth.

January WTI Crude Oil Futures

In an update from yesterday, I talked about the holiday trading range for January WTI crude and insignificance of the daily bearish pennant pattern. This idea has been proven categorically false, with a sharp break south being the order of Friday’s trade.

January WTI Crude Oil Futures (CL), Daily Chart
January WTI Crude Oil Futures (CL), Daily Chart

There are two levels on my radar for the remainder of the session:

  • Resistance(1): Pennant Value Area, $54.50
  • Support(1): Psyche Level, $50.00

Bottom Line: If the sell-off continues, then scalps to the long from the vicinity of $50.00 are highly likely to be successful. Until elected, I will have buys queued up from $50.06. With an initial stop at $49.89, this trade produces a fast 12-15 pips using a sub-1:1 risk vs reward management plan.

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