Technical analysis, 6th July 2017

The crude oil data this week was strong, there’s no two ways about that. Both the EIA and API saw large draws which would be considered outliers in most trading conditions. However, with news of Russia objecting to future OPEC output cuts, and many reasons given to explain this as a just a temporary fall in inventories, the markets have not changed their recent bearish stance.

  • API Weekly Crude Oil Stock Actual -5.764M Expected -1.600M
  • Crude Oil Inventories Actual -6.299M Expected -2.283M 0.118M
  • Cushing Crude Oil Inventories Actual -1.334M
  • Distillate Fuel Production Actual -0.144M
  • EIA Weekly Distillates Stocks Actual -1.850M Expected 0.217M
  • Gasoline Inventories Actual -3.669M Expected -1.067M

Fundamental data is useful and often drives market direction. However it is very important to see how a market reacts to data. If the data is bullish, but the market has a bearish reaction, it’s important to try and understand why.

In my opinion price action overrides everything. The price will tell you what the market feels about all the news and fundamental data that currently exists. So (in my opinion) don’t just buy bullish data, see how the market reacts to that data !

Market spikes on EIA inventory data, but fails to maintain rally

The chart above shows volume by time, volume by price, and the VWAP with bands. In summary you can see the market is quite bullish in the morning and afternoon, staying above the pink VWAP line.

The EIA inventory data is released at 17:00 on this chart. You can see the very bullish data rallies the market. It then sells off, and the market retests the highs (a double top), but fails to go any higher. There is then an eventual big selloff, closing below the VWAP for the day.

My interpretation of this data is bearish, certainly for tomorrow (last day of the week). I will be looking to sell pullbacks, and keeping my stops above the high of today. Looking at longer term charts, I have a few targets for the shorts, but will see how the market plays out tomorrow.

All charts are from ICE Brent Crude Oil Front Month.

About the author

Trading and Investment

Traded the markets for over 15 years, including Commodities, Bonds, Currencies, Equities, and Indices. I have also worked as a Chartered Financial Planner.
CeMAP, CeFA, DipFA, AdvDipFA, Ba(Hons) Economics, Chartered ALIBF

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.