Crude Oil Traders: Brace Yourself for More Volatility!

[MichelGJulien 10]

Again, my scenario from Friday afternoon has played out very well today. I said back then that we should come down a bit from where we closed Friday (106.01) to 104.80/105, and then up we'd go. That's exactly what happened during the pit session. The session low was at 105.02. Pretty close! The market opened at 105.68 this morning, well within Friday's range and value area. From the open we went down directly to, first, test the high volume level at 105.40, then the "do-or-die" support area at 104.86/105.02. The initial balance came in at 53 ticks today, i.e. 33% below its 10-day average. Therefore the volatility was below average. I noticed something recently. When the initial balance range is substantially below its 10-day average (e.g. <30%), the rest of the pit session tends to be the opposite way, i.e. more volatile. Something to watch in the coming days to determine if this is becoming a reliable pattern.

 

Going back to what happened during the pit session, there was a very strong rejection of 105.02 by the market when the price came down to test that level. That prompted me to tweet: "Told u last Friday we were gonna be in for some volatility this week". As a matter of fact, I have the feeling that those kind of knee-jerk reactions are going to be more frequent from now on. Once Friday's gap at 106.01 was filled, price kept going up until it reached a high of 106.46. I entered a short trade at that level seeing some kind of an extreme in this move. Again, I tweeted: "Today we had an "open-rejection-reverse" type of opening. Normally, extremes do not hold on such days. So 106.46 may be HOD". And it was indeed HOD. Not sure though that it is going to hold. The trend has now started to shift from bearish to bullish on the 4hr chart, so we could have more upside in store during the overnight session and/or tomorrow. Trade accordingly.

 

More upside could be in the cards tomorrow for WTI crude oil

 

I took 4 trades today:

 

1. Short 105.25 at 10:00, exit 105.40 at 10:11 for a -15 ticks loss.

2. Long 105.75 at 11:28, exit 105.95 at 11:34 for a +20 ticks profit.

3. Short 106.44 at 12:24, exit 106.21 at 12:28 for a +23 ticks profit.

4. Short 105.89 at 13:37, exit 105.89 at 13:50 for a breakeven trade. Result: +28 ticks today.

 

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