short on USOIL untill EIA data on inventories
On a fundamental basis, I am short USOIL long term since I believe a higher price will only incentivize higher production which will lead to higher inventories and therefore lower price, with price balancing out over the long term near the marginal cost of production for shale producers which is around 40-45 per barrel.
On market sentiment basis, I see the drawdown in long USOIL positions from last week make a dent on the bullishness the market has had up until now. Although it could still reverse, I see it as a step towards having marked a top in USOIL.
On a technical basis, we are still in a range of consolidation although we are far from the bottom of the range and that brings shorting opportunities, at least until we reach that bottom of the range. I see three sell signals so far that could make for a nice intraday short at least until the release of EIA inventories which would likely trigger a short covering and a bounce:
first, a rejection of the 0.382 Fibonacci retracement of the consolidation rage at 53.48;
second, a failure to make an uptrend on a 1hr time frame;
third, a break of the 0.5 Fibonacci retracement of the consolidation range at 52.95.
In conclusion, the short might work intraday before the EIA release of inventory data that usually triggers a short covering. I set the take profit at the 0.618 Fibonacci retracement from 52.95 to 52.42 . I think this is a high risk to return trade of very short duration.
On market sentiment basis, I see the drawdown in long USOIL positions from last week make a dent on the bullishness the market has had up until now. Although it could still reverse, I see it as a step towards having marked a top in USOIL.
On a technical basis, we are still in a range of consolidation although we are far from the bottom of the range and that brings shorting opportunities, at least until we reach that bottom of the range. I see three sell signals so far that could make for a nice intraday short at least until the release of EIA inventories which would likely trigger a short covering and a bounce:
first, a rejection of the 0.382 Fibonacci retracement of the consolidation rage at 53.48;
second, a failure to make an uptrend on a 1hr time frame;
third, a break of the 0.5 Fibonacci retracement of the consolidation range at 52.95.
In conclusion, the short might work intraday before the EIA release of inventory data that usually triggers a short covering. I set the take profit at the 0.618 Fibonacci retracement from 52.95 to 52.42 . I think this is a high risk to return trade of very short duration.
Trade closed manually:
Took profits early because it broke the blue trend line