As the week starts, our attention turns to the June Crude Oil futures (NYMEX:CL.M14.E). After gaining nearly $7/barrel in less than a month, the market has recently consolidated around $103.50/barrel as it begins to decide which direction it will take. It appears that some of the recent slowing of the market is due to profit-taking, as the recent sharp up-trend may have gained too much too soon. There are a number of fundamental factors at play in the market, many of which seem to work in contrast with each other: support from Russia-Ukraine uncertainty, resistance from ample supply concerns, and improved demand prospects following solid US Economic data last week. With a number of different fundamental factors in play – and uncertainty over which fundamental factor the market will focus on moving forward – I will focus on the technical aspects of the market for a potential trading opportunity.
Thursday’s range last week was consolidated within the previous day’s range and a move above or below that range should give us good direction to go off of. The market has started off weak this morning, and being close to $105/barrel resistance, I think that a correction off of this recent move is the more likely direction. In the case of a move below last Thursday’s low print of 102.75, I would be a seller in this market as it will have broken this consolidation. If filled, I would place a protective stop order above Thursday’s high of $103.92. My short-term target would be back down to the recent up-trend line, rolling stops behind the position accordingly.
To take advantage of this move with a long-term viewpoint, I would look to purchase relatively inexpensive call options and option spreads where risk on the position is limited to what you pay for the option.
I advise clients on trading futures and futures options markets on a day to day basis. If you have any questions regarding this chart or questions regarding trading futures and futures options, feel free to call me directly at 888-272-6926.
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