Anthony08: yes that's why crude oil can be very rewarding when you are right. But the tricky thing is that there is a lot of noise of this market giving false signals or putting one's conviction at test. One of the hardest thing when I try some medium/long-term trade is to stick to one's position.
below I explain why I stick to my short from last week (you can find some other graphs and comments on http://oiltrading.blog ) don't hesitate to send me some feedback.
My point is the same: market has been driven but OPEC announcement and future expectations and prices do no fully reflect fundamentals for the moment.
- Current fundamentals: bad
- Expectations: too much?
- Sentiment: contrarian
- Technicals: ok
Brent prices are currently at the top of the range of the 9 past previous months. This does not reflect the fundamentals and show the impact on expectations. I think $50 a barrel of Brent would be a better price.
Fundamentals are currently very bad. Production at historical highs from old producers (Saoudi Arabia, Russia) + new production coming quickly to the market (US, Nigeria,Iraq, Iran..).
You can see this imbalance in the recent build-in in inventories(Cushing).
Too much expectations?
Yes there is a deal so what? I know that OPEC and non-OPEC have agreed to around 2m b/d in production cut next year. BUT
- This si for next year
- This may not be fully respected
- Even with this cut the market wont trim the glut before 2018-2019
Sentiment: contrarian approach
Investors are currently holding record long positions (for the past 2 and a half year). Net long contract are above the 300 thousand threshold.
Hedge funds increased wagers on rising WTI by 2.5 percent in the week ended Dec. 13, U.S. Commodity Futures Trading Commission data show, while shorts, or bets on lower prices, tumbled 30 percent to the lowest level since May.
- when everyone is buying and price is high: sell
- Possible long liquidation if catalysts (ex: data on supply and demand fail to live up to expectations)
On the chart 10-min chart below I want to show you that the technicals are aligned with the broader picture on the short term.
See OilTrading.blog for chart: 9.12.2016 10min chart Brent ()
The support at $55 has been tested a few times and there was no real bounce above this level.
I think shorting now could be a good entry point to profit from the small rally from the end of last week.
Full article: https://oiltrading.blog/2016/12/19/w...he-short-term/