Crude Oil Markets Gapped Lower, resistance at $40 (With trading strategy)

Oil is weak on Thursday and undermined by a weekly rise in U.S. crude-oil inventories and concern about demand given the muddled outlook for another round of fiscal stimulus by Congress in response to the COVID-19 pandemic.

U.S. West Texas Intermediate (WTI) crude rose 0.11% to $40.197 a barrel; Brent was up to $42.290 a barrel, gaining 0.13% by 11:30(GMT+8) on Thursday.

Oil prices remain volatile as the sentiment-linked commodity swings aggressively in response to changes in trader risk appetite. Crude oil price action has oscillated back and forth between critical technical support and resistance levels over recent trading sessions amid conflicting bullish and bearish headlines.

For example, fiscal stimulus negotiations, in addition to Trump health updates and election speculation, have largely caused markets to whipsaw. Reports of paused crude oil production in the Gulf of Mexico due to Hurricane Delta likely exacerbated a short-squeeze higher by oil prices, but this seems largely priced in now.

The Energy Information Administration reported Wednesday that U.S. crude inventories rose by 500,000 barrels for the week ended Oct. 2.  

The EIA data also showed crude stocks at the Cushing, Okla., storage hub edged up by 400,000 barrels for the week. Gasoline supply, meanwhile, fell by 1.4 million barrels, while distillate stockpiles declined by 1 million barrels. 

The price reaction in crude oil signals “the market isn’t buying it and we need to accept that immediate consumer relief in the U.S. will be hard to come by, at least until the election is over,” wrote analysts at JBC Energy, a Vienna-based consulting firm, in a note.

Data from the American Petroleum Institute revealed that U.S. crude oil stocks increased by 951,000 barrels last week – more than anticipated, also played its part in oil prices.

Online brokerage chief market strategist AxiCorp Stephen Innes said: “(This was) not exactly what the recovery doctor ordered as the oil market was already tanking from a two-week high after President Trump quashed hope for a pre-election stimulus deal.”

However, losses were limited by restrictions on the supply side.

Offshore oil and gas producers in the U.S. Gulf of Mexico are shutting wells and evacuating workers due to Hurricane Delta storm, which turned into a major Category 4 hurricane.

In Norway, the Lederne labour union said it would extend its ongoing oil strike from Oct. 10 if a wage deal is not reached.

Trading Strategy (source: Trading Central)

Pivot: 41.70

Our preference: long positions above 41.70 with targets at 42.40 & 42.85 in extension.

Alternative scenario: below 41.70 look for further downside with 41.35 & 41.15 as targets.

Comment: the RSI calls for a rebound.

Supports and resistances:

43.20

42.85

42.40

42.15 Last

41.70

41.35

41.15

Guideline for Trading Central strategy 

Trend chart reading guideline

1. First look at the time period in the upper left corner of the chart: ·30MIN and 1H chart shows the trading suggestions for intraday ·Daily chart shows the market trend analysis in next 2-3 days

2. The blue horizontal line on the chart marks the pivot: pivot indicates the reversal of the market. When the price is above the pivot, it indicates an upward trend, when the price is below the pivot , it indicates a downward trend. When the price breaks through the pivot, the trend is reversed.

3. The red and blue thin curves in the Candlestick chart chart are technical indicators: Red line is MA20+Bollinger bands, Blue line is MA50. under the Candlestick chart chart are also the technical indicators: Blue line is RSI, Red line is 9MA;

4. The green horizontal line is the resistance level for a price increase, and is also the profit target for long orders; the red horizontal line is the support level for a price decrease, and is also the profit target for short orders.

How to use TC strategy？

1.[Pivot] is the reversal line of the market trend. When the price up the pivot line which means in Bullish, you can open a long position or Buy. on the contrary, when the price under pivot line which means in bearish. You ‘d better make short positions or Sell. 

2. [our preference] is the main trading suggestion for your reference. You can exit your trading refer to this target or close positions before it.

3. [Alternative scenario] is the plan B for your reference. 

4. [Comment] is the technical analysis of market trends and technical support for trading strategies. 

5. [Supports and resistance] Supports are levels where the price tend to find support as it falls.

Resistances are levels where the price tend to find resistance as it rises. So, exit before the trend reverse.