With expiration of the June Crude Oil on Friday May 20th, the most actively traded contract is now the July contract. July Crude Oil traded to 49.56 on Wednesday, May 18th, a new high for the year and a level not seen since October 2015. The strength in Crude faded when the Fed released the minutes from its April meeting. The minutes indicated the Fed is open to raising rates in June as long as the data supports it. This led traders to believe the Fed is more hawkish on rates than the statement released after the meeting revealed.
The idea of a stronger Dollar sent July Crude Oil to support levels Thursday (May 19) morning as it traded down to 47.26, just above the 8 DMA (47.12). Crude Oil rallied from the low as traders became focused on continued supply problems in Canada and Nigeria. The Canadian wildfires continue to cause problems in Alberta as the battle to control the fires has been difficult.
There are reports Nigeria had production problems at its largest plant as militants continue to do damage to operations. The recovery in price was dramatic as crude traded to a new high and settled at 48.67. After settlement price made another new high and ended the day at 48.77. The rally created a strong buying tail resulting in a hammer candlestick. I think a rally above the high of this candle will lead to a push to resistance up at 50.27.
THE TRADE
I propose buying a breakout above Thursdays high of 48.78, expecting July Crude oil to test resistance at 50.27. Place stops in accordance with your account size and risk tolerance.
High – 48.78
Low – 47.26
Last – 48.77
Daily Pivots for 5/21/16:
|
R2 |
49.79 |
|
R1 |
49.28 |
|
PIVOT |
48.27 |
|
S1 |
47.76 |
|
S2 |
46.75 |
|
|
For those interested I hold a weekly livestock webinar on Friday, May 27, at 2:00pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
