A1 Trading Company

Ticker tape by TradingView

June 1, 2020

What the Futures Tell US About Oil

Frank Cabibi

Featured Photo From: https://responsive.fxempire.com/cover/1845x1230/webp-lossy-70.q50/fxempire/2020/05/Crude-Oil-Pump-6.jpg

WTI Crude Oil Futures gained 88% last month, as oil reaches a record gain for the month of May. USOil is essentially flat since open, but looks like it recently converted that resistance into support, and perhaps become a long position for traders. Futures gained during the month of May, but dropped today in light of the tensions between US and China.

What Are Futures?

Traders purchase or sell contracts with a predetermined price at a specific time in the future. In other words, traders enter in a contract now for a future price of that commodity, stock or index. Futures markets are based on this flow of predetermined prices that are expected to come.

Last month, the June and July futures for oil were up substantially, creating a strong sentiment for investors to purchase oil. But futures change; one week, they could be up and the next week down.

What Are July Futures Telling Us?

Source: https://oilprice.com/widgets/oilprice_image/45_5_1591035540

On the chart above, you can see the heavy changes in price for the futures contracts. This chart shows the WTI Crude Oil futures prices in the past one year. Futures hit as high as $63.27 on January 6, 2020. As of now, July futures are down a little over 1% for the day at $35.13. Since late April and into May, prices climbed significantly due to increased demand. Today, we saw a small decline even as OPEC plans on continuing cuts on production to lessen supply and cause prices to rise again. This drop in futures prices has something to do with relations with the US and China.

In more recent news, Russia and OPEC are closer to reaching a decision, but tensions between the US and China not only affect market prices, but commodities like oil too. The report on potential production cuts is expected to be on June 4, which will determine the decisions of traders and investors alike. If we were to see an extended cut for another month, demand in this global commodity will probably rise, as well as the price.

Technicals

The 14 day RSI now reached 63, almost the highest it's ever been since the beginning of this year, showing signs of becoming overbought (overbought is 70). Regardless, the prices will swing depending on news of the US and China talks.

This screenshot I took on TradingView shows the price of oil in relation to the S&P 500. You can tell that they are mostly climbing and descending together. That is why the US and China issue is imperative in oil's price, along with OPEC's decision on cuts. With oil climbing closer to its 200 DMA, we might be able to reach that resistance level if production cuts happen again and tensions between the US and China dwindle.

What Now?

With the Sino-American relationship creating volatile markets back in 2019, this could prove to be the biggest mover for US markets and commodities. Traders are awaiting the news on OPEC as futures fluctuate between small positive and negative gains/losses for the day. Tensions have gotten worse between the two countries based on how the US blames China for mishandling the present pandemic and their national security laws. Traders are concerned that the price will not continue to rise.

Notes

- Watch for OPEC's decision expected to report on June 4
- Stay posted on US-China conflict
- Look out for upcoming resistance on the 200 day moving average
- If oil futures gain, the current price of oil will follow
- US market indices can help gauge the price and momentum of oil
- Keep an eye on USOil futures as well as US market futures

About Our Community

Thanks for reading! If you are interested in joining our trading community, we have chatrooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.

https://a1trading.com/vip-membership-m/

Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

A1 Edgefinder

#1 Market Scanner Tool
Take 10% off using code "READER"
GET ACCESS NOW
Want to See Our Trades?

Join The VIP Community!

Our entries, exits & analysis
Live Webinar Coaching
Trading Chatrooms
Strategy Library 
Exclusive Trading Guides
Use Code "READER" for 10% OFF!
JOIN NOWJoin FREE Discord
Listen to More Episodes
Get Ready for the Bear Market

Last week’s selloff was brutal for investors in the US stock market: the Dow Jones Industrial Average closed at its lowest level since late 2020, falling to 29590.41, losing 1.6% on Friday alone. With the S&P 500 currently down a whopping 23% from January’s highs this year, and other indexes close behind percentagewise, stock market […]

Read More
Why the New FOMC Decision Matters

Yesterday, the Federal Open Market Committee (FOMC), the Federal Reserve’s policy-making body, implemented yet another 75 basis point interest rate hike. While this move was perfectly in line with market forecasts, Chair Powell’s comments following the subsequent press conference, in which he discussed the FOMC’s new set of economic projections, were significant. He continued to […]

Read More
Shocking CAD Inflation News

Statistics Canada released a surprising new batch of inflation data this morning: month-over-month CPI failed to meet market forecasts, declining by 0.3% instead of the anticipated 0.1%. Rather than being an outlier, the other measurements of CPI mostly followed suit, as both year-over-year Trimmed CPI and Median CPI likewise failed to meet expectations. Trimmed CPI’s […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
Home
Edgefinder
VIP
Menu
homesmartphonelaptopmenu linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram