This is a sample entry from Andrew Pawielski’s email newsletter, Market Dimensions Advisory, published on November 19, 2015.
For the last 2 weeks, the WTI crude market has been making another run lower. Looking at the January contract, WTI attempted to hit the $50 barrel mark and fell short, only reaching $49.23. I believe the rejection of this psychological number and the obvious over supply concerns caught up with the market and has broken the short term bull’s back. We are now in what appears to be a bear run to hit previous lows from the end of August under $40 a barrel (low $39.97 Aug 24th). It will be interesting to see if we push through or find support. However, for the last 2 weeks, we have been trending lower and the lower trend is targeting $40 in the near future.
Aside from just flat priced futures positions and calendar spreads in WTI crude, I also track the relationship between Brent Crude (think European crude) and WTI (our US bench mark crude). The relationship between WTI and Brent has typically had Brent trading at a higher price. It wasn’t uncommon for this spread to range from a $7 to $5 difference on historical pricing for the same contract month. In recent months, this new crude environment has tightened up, making new highs on November 16th at -1.65 on the January spread. Since those recent highs on a daily, we have pulled back to the most recent high volume area of -2.60. I think that we will gain support at these levels to continue the upward trend and attempt to make a run for new highs. I think this upward trend will stay in play and stay above the 200 day moving average @ -2.38.
Trade Idea: Buy Jan WTI Crude – Sell Jan Brent Crude (dt pro symbol: NSEA-WTI-MF6 -,+)
Entry: Buy Jan WTI/Brent spread @ -2.70
Risk: Stop @ -3.50 Risk 80 cents or $800 before fees
Target: Looking to make a run at new highs -1.60 pricing area
Margin: $1620 per spread
For those who would like to discuss my specific entry of this trade, please reach out to me directly, and we can discuss what entry, stop, number of contracts and target will be best for you based on your risk profile.
If you would like to follow along with more of my trade ideas or know what I am watching in the markets I encourage you to sign up for my free trading advisory, Market Dimensions Advisory, below.
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Risk Disclosure
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
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