Chapter 2 WTI Falls as the Market Cools Down （11.01）
Fundamentals
During Wednesday's (November 1st) Asian session, WTI crude oil oscillated downwards, and it is currently trading at 80.8 dollars/bbl. Yesterday, the crude oil oscillated in the Asian session, and rebounded after a plunge in the European and the U.S. sessions like it did a few days ago. It once plummeted to 81.6 and then rebounded to 83.1. Later, it declined again after oscillations, once reached 80.5. Finally, it rebounded and closed the daily chart at 81.1. Our recommendation was to go long at 81.6, and buy more if WTI reached 80.6 yesterday, where investors could take profits. Now, WTI has fallen below the October lows, which means that the geopolitical premium has been completely retracted. Besides, yesterday's news is not much, the API data show that the U.S. crude oil slightly accumulates the stock, but the impact is insufficient. Currently, oil prices are facing a situation of low inventories, and weak supply and demand. It is difficult to change in the short term, and at present, the oil price is not likely to drop below 80 dollars, the target price of which the SPR will replenish the stock. As the bulls will not surrender easily, investors need to pay attention to the oscillation near 80 in the short term. Also, the oscillation in oil prices will be expanded, and it will be more crucial for investors to trade at the right moment. Without a good profit/loss ratio, investors should focus more on the situation and trade less with the target of maximizing the profits. If there is no more than 2 times of profits, I think that it's not the right time to take the plunge.
Inventory: As of the week of October 27th, API crude oil inventories increased by 1.347 million barrels, while it is expected to increase by 1.601 million barrels compared to a previous decrease of 2.668 million barrels.
Today's focus: The Fed Monetary policy resolution, Powell's speech, and the EIA crude oil inventory.
Technical Analysis
WTI crude oil plunged again yesterday, once reaching 80.5, and it was the second consecutive day that WTI closed negatively. At the same time, the oscillating ups and downs last week ended, giving back all the risk premium regarding the Palestinian-Israeli conflict. Now, the market price is determined by the Middle East, as the war will not affect the supply/demand when oil-producing countries are not involved. Nonetheless, WTI tends to the left side under sentiments and taking profits/stopping loss. Thus, investors must be patient to avoid losing even in the right direction. Since the conflict continues, this logic will maintain to be a catalyst for an ascending oil trend. At present, WTI crude oil is preparing to enter the final stage of a double bottom pattern, and there is strong support at 80. Therefore, aggressive investors should go long with small positions as the profit/loss ratio is substantial. For the above, try to consider the area from 82 to 83.
Today's trading recommendations: Buy at lows. If WTI retraced back to 80.0, try to go long with small positions and set the stop-loss at 79.5. To take profits, the first target will be at 82.5, where investors can reduce the position size and move the stop-loss to breakeven, and put the second target at 83.5. If WTI plummets to 79.0 again, investors should enter and go long, and stop loss by 0.5 dollars. The target to take profits is the same as the first target above.
Trading Recommendations
Trading direction: Long
Entry price: 80.000
Target price: 82.500
Stop loss: 79.500
Support: 80.500/80.000
Resistance: 81.500/82.500
