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Short term
Trade view / 27 May 2016 at 7:29 GMT

#SaxoStrats: No fireworks above $50 as correction looms

Head of Commodity Strategy / Saxo Bank
Denmark
Instrument: OILUSJUL16
Price target:
Market price:
pic
 
Background

  • Both WTI and Brent oil made it above $50 yesterday without triggering additional buying.
  • Ascending wedges seen on both Brent and WTI. They often resolve in very steep selloffs .
  • Hedge funds held a combined and near record 650 million barrels last week.
  • The forward curve is flattening with hedgers selling into the back months .
  • US refinery margins (RBOB-WTI spread) are at their weakest in 6 years for this time of year

Management

parameters
 

Light Sweet Crude Oil (WTI) continuous:
oil
 Source: SaxoTraderGO


WTI continuous 5-year chart:
wti
 Source: SaxoTraderGO
 
— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
1y
Ole Hansen Ole Hansen
Using just 1 ATR as a stop might be too tight for some. Alternatively the October high at $50.92 should act as an additional layer of protection for those wishing to place their stop further away.
1y
ChristianK ChristianK
Hi Ole. What is the difference between trading the futures and the CFD?
1y
Ole Hansen Ole Hansen
hi Christian. As the CFD tracks the futures price the main difference is the exposure. One futures lot is 1000 barrels (USD 49,000) while in CFD's you have the option of trading just 25 barrels (USD 1,225)
1y
ChristianK ChristianK
Thanks. The price has come down quit fast. I only did one lot / first half. Is it still time to do the other half or should one wait?
1y
Ole Hansen Ole Hansen
I would probably wait as we could see a small bounce into the evening.
1y
FK1990 FK1990
@olehansen hi ole. is this bounce today implying there is one more wave upwards?
1y
blue_67 blue_67
Hi Ole, does your short position still stands, while crude is bouncing up and down in a range of 49.10-49.70 the last days without choosing some direction and the Opec meeting next thursday?
1y
Ole Hansen Ole Hansen
Crude oil is bouncing ahead of the Opec meeting as the dollar has weakened and supply disruptions receive continued attention. The downward move was to shallow for my likening as it failed to break below the wedge mentioned. I see limited upside but the current behavior indicates that an attempt at the Oct high at $50.90 could be made.

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