Crude Oil (CL) Gap Fill Long

While it's unclear whether crude, which has experienced large moves recently on account of the developing conflict between Israel-Hamas, wants to trade higher or lower over the longer-term, we’re looking to take near-term longs after filling the downside futures gap formed 10/6. We’re only showing down to a 30-minute chart here, but there are some smaller supply/sell zones @ ~84.25-84.75, which could be used for initial profit targets. If the trade works for a bounce, you can also consider applying mechanical targets @ 1:1, 2:1, 3:1, etc. Regarding an exact entry price and stop loss placement, the gap fill demand zone is a bit messy. The closing price of the gap itself, technically, is 82.81, so ideally we’d see CL trade to that #. However, markets aren’t always THAT precise, so it could put in a low at a slightly higher price. Furthermore, stop placement really depends on the timeframe used. The “distal” (lower bound) line of the daily demand/buy zone is 81.50, so if you can afford the risk, a physical stop could be placed below (never align your stops exactly w/ a zone’s range + don’t use whole numbers/quarters). More conservative placement could be slightly below 81.71 or 82.31, but there’s a higher chance you’ll be stopped out; depending on account/position size and risk tolerance, you can always deploy a “small loss, reenter” strategy. If you’re nimble enough, consider using a micro timeframe (single-digit minute, tick, or volume-based chart) to ID a trend reversal signal (higher high, higher low) before entering. If CL violates recently formed daily demand (82.81-81.50), be aware that there are “bear trap” areas waiting just beneath. Entries within the corrective segment of the uptrend that began in late-June are valid until prices breech the 77.59 pivot.

As always, feel free to provide feedback and/or ask questions. Good luck, be smart, and enjoy the journey!

Jon @ LionHart Trading

Comment:

Well, buyers are stepping in ahead of a complete close-based gap fill. This is not uncommon - sometimes buyers/sellers will trade support/resistance levels near complete gaps and/or candlestick wicks (aka shadows). Of course, prices could come back down, in the near-term or at some other point. If the current bounce gest faded and the proper gap is retested, keep an eye on the RSI (or another momentum oscillator) in case a bullish divergence presents . We've a bit of a minor pivot/demand zone @ 83.63-83.87, so an intraday trend continuation long could be played too.

JHart @ LionHart Trading