Have you ever traded the news?This is a great way to see how your instrument reacts to a news release.
MMMicro WTI Crude Oil Futures
72.98USDD
+4.94+7.26%
At close at Jun 13, 20:59 GMT
USD
No trades
MCL1! trade ideas
Crude oil approaches bullish reversal zoneWeak Chinese demand and hopes for a Middle East peace deal on the downside, OPEC+ production cuts and geopolitical tensions on the topside. It’s amazing how the same narratives get rolled out depending on where the WTI crude price sits within its 2024 range, often reaching their crescendo just before the price turns. I wonder whether we’re about to see the same outcome again.
WTI has fallen heavily over the past week, apparently on hopes for a peace deal in Gaza. That may be reason, and I hope it happens from a humanitarian perspective, but I’ve been around long enough to know narratives are often designed to fit with the prevailing price action. All I know is that the last two occasions WTI has dipped to $72.50 per barrel it’s coincided with a near-term bottom. Sitting at $73.11, the price is not far away again.
I would be reluctant to buy preemptively, but should the price bounce from $72.50, it would make for a decent long setup, allowing for a stop to be placed beneath the February low of $71.44 for protection. Minor levels at $74.60 and $76.94 are two potential targets, $80.30 another considering how much work the price did either side earlier in the year.
DS
Decoding Money Flow within Markets to Anticipate Price DirectionI. Introduction
In the intricate world of financial markets, understanding the flow of capital between different assets is paramount for traders and investors aiming to anticipate price movements. Money doesn't move haphazardly; it often follows patterns and trends influenced by a myriad of factors, including economic indicators, geopolitical events, and inter-market relationships.
This article delves into the concept of money flow between markets, specifically analyzing how volume movements in one market can influence price directions in another. Our focus centers on two pivotal markets: the 10-Year T-Note Futures (ZN1!) and the Light Crude Oil Futures (CL1!). Additionally, we'll touch upon other significant markets such as ES1! (E-mini S&P 500 Futures), GC1! (Gold Futures), 6E1! (Euro FX Futures), BTC1! (Bitcoin Futures), and ZC1! (Corn Futures) to provide a comprehensive view.
By employing the Granger Causality test—a statistical method used to determine if one time series can predict another—we aim to unravel the nuanced relationships between these markets. Through this exploration, we aspire to equip readers with insights and methodologies that can enhance their trading strategies, particularly in anticipating price directions based on volume dynamics.
II. Understanding Granger Causality
Granger Causality is a powerful statistical tool used to determine whether one time series can predict another. While it doesn't establish a direct cause-and-effect relationship in the strictest sense, it helps identify if past values of one variable contain information that can predict future values of another. In the context of financial markets, this can be invaluable for traders seeking to understand how movements in one market might influence another.
Pros and Cons:
Predictive Power: It provides a systematic way to determine if one market’s past behavior can forecast another’s, helping traders anticipate potential market movements.
Quantitative Analysis: Offers a statistical basis for analyzing market relationships, reducing reliance on subjective judgment.
Lag Dependency: The test is dependent on the chosen lag length, which may not capture all relevant dynamics between the series.
Not True Causality: Granger Causality only suggests a predictive relationship, not a true cause-and-effect mechanism.
III. Understanding Money Flow via Granger Causality
The data used for this analysis consists of daily volume figures for each of the seven markets described above, spanning from January 1, 2018, to the present. While the below heatmap presents results for different lags, we will focus on a lag of 2 days as we aim to capture the short-term predictive relationships that exist between these markets.
Key Findings
The results of the Granger Causality test are presented in the form of a heatmap. This visual representation provides a clear, at-a-glance understanding of which markets have predictive power over others.
Each cell in the matrix represents the p-value of the Granger Causality test between a "Cause" market (row) and an "Effect" market (column). Lower p-values (darker cell) indicate a stronger statistical relationship, suggesting that the volume in the "Cause" market can predict movements in the "Effect" market.
Key Observations related to ZN1! (10-Year T-Note Futures):
The heatmap shows significant Granger-causal relationships between ZN1! volume and the volumes of several other markets, particularly CL1! (Light Crude Oil Futures), where the p-value is 0, indicating a very strong predictive relationship.
This suggests that an increase in volume in ZN1! can reliably predict subsequent volume changes in CL1!, which aligns with our goal of identifying capital flow from ZN1! to CL1! In this case.
IV. Trading Methodology
With the insights gained from the Granger Causality test, we can develop a trading methodology to anticipate price movements in CL1! based on volume patterns observed in ZN1!.
Further Volume Analysis with CCI and VWAP
1. Commodity Channel Index (CCI): CCI is a versatile technical indicator that when applied to volume, measures the volume deviation from its average over a specific period. In this methodology, we use the CCI to identify when ZN1! is experiencing excess volume.
Identifying Excess Volume:
The CCI value for ZN1! above +100 suggests there is an excess of buying volume.
Conversely, when CL1!’s CCI is below +100 while ZN1! is above +100, it implies that the volume from ZN1! has not yet transferred to CL1!, potentially signaling an upcoming volume influx into CL1!.
2. Volume Weighted Average Price (VWAP): The VWAP represents the average price a security has traded at throughout the day, based on both volume and price.
Predicting Price Direction:
If Today’s VWAP is Above Yesterday’s VWAP: This scenario indicates that the market's average trading price is increasing, suggesting bullish sentiment. In this case, if ZN1! shows excess volume (CCI above +100), we would expect CL1! to make a higher high tomorrow.
If Today’s VWAP is Below Yesterday’s VWAP: This scenario suggests bearish sentiment, with the average trading price declining.
Here, if ZN1! shows excess volume, we would expect CL1! to make a lower low tomorrow.
Application of the Methodology:
Step 1: Identify Excess Volume in ZN1!: Using the CCI, determine if ZN1! is above +100.
Step 2: Assess CL1! Volume: Check if CL1! is below +100 on the CCI.
Step 3: Use VWAP to Confirm Direction: Compare today’s VWAP to yesterday’s. If it’s higher, prepare for a higher high in CL1!; if it’s lower, prepare for a lower low.
This methodology combines statistical insights from the Granger Causality test with technical indicators to create a structured approach to trading.
V. Case Studies: Identifying Excess Volume and Anticipating Price Direction
Case Study 1: May 23, 2024
Scenario:
ZN1! exhibited a CCI value of +265.11
CL1!: CCI was at +12.84.
VWAP: Below the prior day’s VWAP.
Outcome:
A lower low was made.
Case Study 2: June 28, 2024
Charts for this case study are at the top of the article.
Scenario:
ZN1! exhibited a CCI value of +175.12
CL1!: CCI was at -90.23.
VWAP: Above the prior day’s VWAP.
Outcome:
A higher high was made.
Case Study 3: July 11, 2024
Scenario:
ZN1! exhibited a CCI value of +133.39
CL1!: CCI was at +0.23.
VWAP: Above the prior day’s VWAP.
Outcome:
A higher high was made.
These case studies underscore the practical application of the trading methodology in real market scenarios.
VI. Conclusion
The exploration of money flow between markets provides valuable insights into how capital shifts can influence price movements across different asset classes.
The trading methodology developed around this relationship, utilizing the Commodity Channel Index (CCI) to measure excess volume and the Volume Weighted Average Price (VWAP) to confirm price direction, offers a systematic approach to capitalizing on these inter-market dynamics. Through the case studies, we demonstrated the practical application of this methodology, showing how traders can anticipate higher highs or lower lows in CL1! based on volume conditions observed in ZN1!.
Key Takeaways:
Granger Causality: This test is an effective tool for uncovering predictive relationships between markets, allowing traders to identify where capital might flow next.
CCI and VWAP: These indicators, when used together, provide a robust framework for interpreting volume data and predicting subsequent price movements.
Limitations and Considerations:
While Granger Causality can reveal important inter-market relationships, it is not without its limitations. The test's accuracy depends on the chosen lag lengths and the stationarity of the data. Additionally, the CCI and VWAP indicators, while powerful, are not infallible and should be used in conjunction with other analysis tools.
Traders should remain mindful of the broader market context, including economic events and geopolitical factors, which can influence market behavior in ways that statistical models may not fully capture. Additionally, effective risk management practices are crucial, as they help mitigate potential losses that may arise from unexpected market movements or the limitations of any predictive models.
When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies.
General Disclaimer:
The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
2024-08-19 - priceactiontds - daily update - oilGood Evening and I hope you are well.
tl;dr
Bear channel continued down and next target is probably 72 if 73.5 won’t hold. Pure weakness in this market.
quote from my weekly update:
bear case: Bears need a daily close below 74.5 to trade back down to 71/72.
comment: Look at that beauty of a channel. Holding like a true champ. Market is much weaker than expected and only going down. Bottom of the channel is where a pullback is expected and if bears are strong, they keep it below 74.5. Next targets for the bears are 73 and then 72. Anything above 75.5 would be a big surprise.
current market cycle: trading range (triangle)
key levels: 72 - 75.5
bull case: Bulls are so weak that they currently can only correct sideways. They need to create a pullback at 73.4 or risk a breakout below the bear channel, where the selling would accelerate. A reasonable target for a pullback would be the breakout retest of last weeks low 74.52.
Invalidation is below 73.1.
bear case: Bears had a strong bear day again and a measured move would bring us to 71.5. If they manage to create a breakout below the bear channel, we could get there much faster than most expect. My drawn big bullish trend line from the triangle runs through 71.7, so close enough. Bears need to keep any pullback below 75, better would be below 74.5.
Invalidation is above 75.5.
short term: Pullback to at least 74.5 is expected but below 73.1 we print 72 or even 71 pretty fast.
medium-long term: We are seeing the big triangle playing out between 72 and 82/84. The high of the triangle got tested until mid of April and we have now tested the lows around 72.5. We are at the bear trend line and odds favor the bears if they stay below 86.27 for trading back down below 76 again. Update: If we break below 70.67, the triangle is dead and we need to find new support. Will update this again when it happens.
current swing trade: None
trade of the day: Mostly sideways during Globex and EU session. US session opened weak and when bulls could not get above 75.5 again, bears tried again and bulls just gave up. Had to be short since the bear bar breaking below 75 and the 1h 20ema.
Oil Price Eyes Test of Monthly LowThe price of oil may attempt to test the monthly low ($71.67) as it extends the decline from the previous week.
Crude Oil Price Outlook
Failure to hold above the $72.90 (78.6% Fibonacci retracement) to $73.20 (78.6% Fibonacci retracement) region raises the scope for a move towards $71.50 (38.2% Fibonacci extension) with a breach below the January low ($69.28) opening up the December low ($67.71).
At the same time, crude may trade within in yearly range should it defend the February low ($71.41) with a move back above $76.30 (61.8% Fibonacci retracement) bringing the $78.50 (50% Fibonacci retracement) to $79.00 (50% Fibonacci retracement) area on the radar.
--- Written by David Song, Strategist at FOREX.com
Crudeoil Weekly Update Technical Analysis: Crude Oil (1 - DAY Timeframe)
In the 1-day timeframe, we're currently observing a developing cup and handle pattern.
Should the price sustain below the demand zone, the probability of further downside increases, signaling potential bearish momentum?
Conversely, if a reversal occurs, there is a strong likelihood of a significant upside movement, with a possible 400+ point advance.
IF THIS WILL HELP YOU PLEASE LIKE THE POST ❤️
Disclaimer: This is a technical analysis based on current data and should not be considered financial advice. Trading involves risk, and past performance is not indicative of future results.
FOLLOW FOR INTRADAY SETUP ❤️
Crude oil can hit 9000 mark again in coming 3-4 monthThe recent assassination of a Hamas leader by Israel and Iran's promise of retaliation could escalate tensions into a broader conflict in the Middle East. This situation raises concerns that Iran might block the strategic Strait of Hormuz , a critical chokepoint for global oil trade . Additionally, there are speculations that Iran could test a nuclear device in the coming months, potentially declaring itself a nuclear state. Russia's continuous supply of S-300 and S-400 missile systems to Iran further suggests that something significant may be in the works. These developments could have profound implications for oil markets and global stability.
OIL (WTI) SHORTThe price action formed an inverted cup and handle pattern, were price is currently in a parallel channel that acts as the handle. A breakout under the lower support will lead to the $71.90 area support, then another breakout of that support will lead to the $70.89 or so area.
The price is also in a current death cross, the 8 daily EMA under the 21 daily EMA.
A breakout over the orange ray would invalidate this idea.
Oil slips again and Geopolitical tensions rise In my last post about Oil, I said that "Oil has a good possibility to get back to the range of 83.50 and 84.50", but also "Oil had broken 3 LH's that were created between July 22nd, 2024 and August 1st, 2024". I also mentioned that "we can see a pullback in the ranges of 78.84 and 77.12". In my outlook at the top of the week, I said that I was on the buyer's side until price showed otherwise. Now, price is showing signs of not continuing buys but settling into seller's territory.
In this latest out look, I'm going to give you my insight on where the market can possibly go going into next week. Around early 6AM, price broke the HL from last Friday that shot Oil up all the way to the 77.89 area on this past Monday. On Tuesday, price created the "M" formation signaling that sellers were now starting to step in that sent the market selling for the rest of the week. On today Friday, August 16th, Price hit a demand area that sent price shooting past the HL that i stated early in my typing. This could potentially mean that we are now in seller's territory for a minute depending on how the markets may move going into next week. We did leave a gap above after yesterday's sell movement that can send price back that way from Monday going into Tuesday depending on market conditions. I believe if price goes back that way it can be just to create a LH, IF price doesn't make buying structure. Right now my current outlook is bias until the market finds its footing from Monday-Tuesday.
Amid Oil selling from the technical side, Oil is facing rocky streets from fear of the United States economy as investors are getting ready to brace for interest rate cuts and other things going on in different countries. From Fed Powell, to Iran retaliation, and to China's weak economy, Oil is in some unpredictable territory especially with a lot of geopolitical tensions rising. Next week news combined with technicals will give a greater outlook on Oil.
CRUDEOIL INTRADAY SETUP Aug 16Crude Oil (1-Hour Timeframe)
Recent Breakout: Crude oil has broken out from a falling wedge pattern, signaling potential for further upside if price sustains above the breakout level.
Outlook: Monitor for signs of retracement or consolidation.
Strike Price Trade Setup:
Entry: Above 6,550
Targets: 6,570, 6,600, 6,630
Stop-Loss: Must have
Remember to adjust your stop-loss and take-profit levels according to your individual risk tolerance.
WTI: Knock, knock…WTI recently rejected the lower edge of the turquoise Target Zone between $79.67 and $85.86. We expect a further advance into this range before the high of turquoise wave B can be established. The price should then turn around and sell off with the last leg of the green wave (2) into our same-colored Target Zone between $49.85 and $27.93.
CRUDEOIL Bullish setup | Aug 14 Technical Analysis: Crude Oil
Timeframe: 1 hour
Current Situation: Oil prices have increased due to lower US inventories and ongoing tensions in the Middle East. However, concerns about weak Chinese demand and potential US interest rate hikes are keeping the market cautious.
Price Action: Crude oil remains range-bound, moving within a rising wedge pattern on the 1-hour timeframe.
Key Levels:
Strong Support: 6,640
Resistance/Target: Expecting a 100-point move, targeting yesterday’s high.
Invalidation Level: Bullish outlook invalidated below 6,610.
Outlook: Watch for a break above 6,640 to confirm bullish momentum and achieve the expected target.
2024-08-13 - priceactiontds - daily update - oilGood Evening and I hope you are well.
tl;dr
Oil - Bears showed signs of life, rejecting 80 with decent selling. Still an inside bar to Monday and bulls bought it at the bull trend line. Below 78 bears start hoping again, but it’s more reasonable to expect more upside. At the very least a retest of 80 and if bears are strong, they try to keep that resistance.
comment: Expected pullback by the bears and bulls bought the bull trend line. Everything in order so far, retest of 80 is expected. If bulls are strong, we will break above for 81 or 82. Below 77.6 bears could get hopeful and again but I doubt it. Daily ema is at 77.2, so that would be their first target.
current market cycle: trading range (triangle)
key levels: 77 - 82
bull case: Bulls tried twice at 80.15 and then mostly stepped aside after bears increased the selling pressure on bar 37/38. They bought the bull trend line and want a retest of 80 from here. If they fail to keep it above the bull trend line and 77.6, they risk that 80 was a lower high and bears might try to sell down to 72 again. Since Monday was so strong, more upside is the higher probability outcome over the next days.
Invalidation is below 78.6.
bear case: Bears generated decent selling pressure and retest the bull trend line. I don’t think they want to fight hard for 79 and will try to keep it below 80 again. If they would manage to break below the bull trend line, their next target would be the daily ema at 77.2.
Invalidation is above 79.
short term: Bullish above 78.8 for retest of 80. Bearish below 77.6 for more downside.
medium-long term: We are seeing the big triangle playing out between 72 and 82/84. The high of the triangle got tested until mid of April and we have now tested the lows around 72.5. We are at the bear trend line and odds favor the bears if they stay below 86.27 for trading back down below 76 again. Update: If we break below 70.67, the triangle is dead and we need to find new support. Will update this again when it happens.
current swing trade: None
trade of the day: Sell below bar 37. Can take most off at the double bottom bar 50 + 54 and exit runner once the market reached the bull trend line and refused to trade below it.
OILUSD/H4 WTI oil fluctuates in the stable range of $70 - $80.OILUSD forecast on August 13, 2024:
WTI oil is under pressure from the war and DXY is decreasing. Currently, the oil price has risen from the $71 region back to the $80 area. It is likely that oil will experience a correction before continuing its upward trend. The trading trend today is BUY.
Key levels to watch are: 76.5, 78, 80, and 82.
Recommended orders:
Plan 1: BUY OILUSD zone 76-76.5
SL 75.5
TP 78 - 80 - 81.
Plan 2: BUY OILUSD zone 77.60 - 78.10
SL 77.20
TP 79 - 80 - 81.
Plan 3: SELL OILUSD zone 83.30 - 83.50
SL 83.80
TP 82 - 81 - 78.
Oil crushing it's slippery slope NYMEX:MCL1!
After nearly a month of selling, oil seems to be taking back buyer's momentum that first started on July 17th, 2024 and ended on August 6th, 2024. When the creation of the "W" formed shortly after hitting a 10 min supply area, this signaled the last moments of Oil's sell trend. As we go into this week, we see that oil is still coming in hot to take back supply area's that it created on the 1hr timeframe, but it's due for a pullback. Depending on after market movements, we can possibly see Oil start to pullback to continue making buy structure to the upside. Oil has a good possibility to make it back to the areas of 83.50 and 84.50. Since in current time right now as I'm typing this, Oil has already broken 3 LH's (lower high) that were created between July 22nd, 2024 and August 1st, 2024. We can see pullbacks in the range of 78.84 and 77.12 to potentially see continuation of buying movements. Within this outlook, my current analysis is buyers market until price shows other signs.
Oil Price Pushes Above Opening Range for AugustThe price of oil stages a four-day rally after defending the February low ($71.41) to register a fresh monthly high ($80.16).
Crude Oil Price Outlook
Keep in mind, the rebound from the monthly low ($71.67) kept the Relative Strength Index (RSI) out of oversold territory, with $80.70 (38.2% Fibonacci retracement) on the radar as crude pushes above the opening range for August.
A break/close above $83.30 (23.6% Fibonacci retracement) opens up the July high ($84.52) but the price of oil may face range bound conditions amid the flattening slope in the 50-Day SMA ($78.88).
Lack of momentum to hold above the $78.50 (50% Fibonacci retracement) to $79.00 (50% Fibonacci retracement) region may push the price of oil back towards $76.30 (61.8% Fibonacci retracement), with the next area of interest coming in around $72.90 (78.6% Fibonacci retracement) to $73.20 (78.6% Fibonacci retracement).
--- Written by David Song, Strategist at FOREX.com
Crude's Big BaseCrude Oil (September)
Last week’s close: Settled at 76.84, up 0.65 on Friday and 3.32 on the week
Crude Oil futures are higher by about 1% as geopolitical tensions in the Middle East run hot and Israel prepares for an attack by Iran. Inflation data from China Thursday night was also stronger than expected, and there seems to be positive momentum amid such a narrative, and we brace for data on New Loans overnight tonight.
Price action in WTI Crude Oil futures finished last week strong, clearing previous resistance, which now creates two areas of major three-star support. The first aligns previous resistance with Thursday’s high at 76.40-76.52. The second is a potential floor aligning with Wednesday’s volume spike and Friday’s low 75.84-75.95. Ultimately, we will be watching our Pivot and point of balance closely, and continued action above this level at 76.84-76.87, will encourage a test towards $80.
Bias: Neutral/Bullish
Resistance: 77.63***, 78.88-79.03**, 80.76**, 81.30***
Pivot: 76.84-76.87
Support: 76.40-76.52***, 75.84-75.95***, 75.12-75.27***, 74.45-74.60**, 73.96**, 73.46-73.56**, 72.74-72.94***, 72.23-72.42***, 70.703**, 70.00***
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Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
