Short term
Trade view / 06 September 2016 at 10:13 GMT

#SaxoStrats: WTI crude oil looks attractive on dips

Head of Commodity Strategy / Saxo Bank
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Crude oil continues to experience elevated volatility as the battle between short sellers and “verbal intervention” persists. Reports on Monday that “a major announcement” was forthcoming from Saudi Arabia and Russia helped trigger a 5% rally.

In the end, however, the world’s two biggest producers delivered no new initiatives to support the price. But the signed intent to cooperate to stabilise the market may still prove to be the line in the sand for producers desperate for a higher prices.

Having seen short-selling attempts shot down in flames twice within a month makes us conclude that short-term negative fundamentals may not be enough to convince traders to have another go at the downside. On that basis, we see the price continuing to stabilise, with the short-term risk now skewed to the upside.

Management and risk description

On hitting the first take-profit level at $46.40/barrel for WTI, the stop on the remainder can be raised to entry.

(See also key risks and seasonality factors under parameters below.)


Entry: buy CLV6 or OILUSOCT16 on a limit at $44.40/b.

Stop: $42.90/b.

Target: $46.40/b and $47.80/b.

Time horizon: one to two weeks.

Key risks: Weekly US inventory report and a stronger US dollar. Chinese trade data for August is due on September 8. Crude imports by the world’s biggest importer have been slowing in recent months so this component will be watched closely.

Seasonality: From a seasonal perspective, oil has fallen every September during the last five years.

WTI short term

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Source: Saxo Bank

Long-term view:
WTI long term Source: Saxo Bank

— Edited by John Acher

Non-independent investment research disclaimer applies. Read more
06 September
asousa27 asousa27
Ole, trade already in right?
06 September
Ole Hansen Ole Hansen
Oil has weakened as US traders returned from their long weekend. This has taken CLV6 down to reach our entry level at $44.40.
06 September
asousa27 asousa27
06 September
Pandorra Pandorra
Looks good but very modest, R/R is around 3/4, just used to cover Monday blah.
Ole, what about multi-entries for further strategies? Tnx
06 September
Ole Hansen Ole Hansen
@Pandorra. Looking into that but tricky due to oil's current volatility. A stop should preferably be placed a min. $1.7/b away from entry (1ATR). In order to achieve a 1 to 2 risk reward you basically need an 8% move in the market, not impossible but challenging.
06 September
Pandorra Pandorra
yep, i understood. either way I'm not to dispute about your view at all, but to say thanks if you could find separate points for entry, maybe mapped on 2hr-4hr tf intraday volatility and ATR.


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