The weekly EIA crude oil inventory report is released on Wednesday mornings, and it often provides good trade opportunities. We got a good setup and trade today, and today’s action may have longer term implications.
I’ve previously written about trading in the energy futures around the EIA (government) inventory reports for crude oil (read it HERE) and natural gas (read HERE). These reports often set the market’s tone for the week, which can mean big moves in a short amount of time.
In this morning’s Futures Watch List for Swing Trader’s Insight I suggested we should look for a potential breakout trade after the 9:30 AM EIA report:
August Crude Oil: Watch the 50.00 as a pivot point today and look for a breakout trade after the 9:30 AM inventory report. Use the overnight high (50.54) and low (49.86) as reference prices.
The overnight and early morning structure was range bound, centered roughly on the $50.00 level. In my Tuesday comment I noted that the 1H16 rally appeared to be stalling against the $50.00 level; today’s post-report move had the potential to determine whether the market would establish above or below $50.
I suggested we use the overnight high and low for breakout trade entry levels. This would be where the market would break out of its balance, potentially starting a trending move. I enter these trades using stop orders a few ticks above the reference high and a few ticks below the reverence low.
The EIA report showed a smaller than forecast drop in crude oil stocks last week, and crude oil futures sold off as soon as the report was released, which triggered out short sale. We place the initial stop loss back above $50 so we would take the loss if momentum reversed back up.
August crude oil fell to a session low of 49.02 by 10:45 AM. The $49.00 level was a natural support point; the initial hold of this support could have been a sound reason to take a profit. On the other hand, the late morning double top at 49.25 led to a drop through 49.00 to make a session low of $48.40. $48.47 is a significant Fibonacci retracement support level, and it held in the early afternoon.
Today’s action may have longer term implications. As I said on Tuesday, the $50 level is a natural pivot point for trend. If the market continues to stall up here, we could start to look for a bigger, longer term selloff.
Essential Guide for Futures Swing Trading
In this guide, experienced trader and broker Scott Hoffman explains the trading methods he uses to analyze and trade the futures markets and to publish his trade advisory, Swing Trader’s Insight.
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.
THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.
TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.
YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.
GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.