As usual on Wednesdays at 3:30pm GMT (10:30am EST) the Department of Energy's Inventory figures were released. These numbers follow the API Petroleum Inventory figures from Tuesday night, which came out with a significant draw. This reported drawdown was at the level which was around where the average analyst's expectations for the DOE's number was, so when the DOE Crude number came out significantly lower today it was quite a shock. Remember lower numbers indicate less supply which translates to higher prices. Usually the focus on this report is on the Crude Number, as the Crude Oil Future is probably the most highly traded instrument in the Energy Complex, but also the Heating Oil and RBOB Gasoline will also move off the Gasoline and Distillates Inventory data as reported on this blog last week. It is really best if all 3 of the figures accross the Energy Complex agree, as if for instance Crude Inventories comes out with a modest build but Distillates has a large draw, the Crude Oil Future might move down quickly in response to its initial build figure, but then rally in sympathy with the draw seen on the Distillates data. Anyway here is the data:
DOE CRUDE: -7.28M V -500KE; GASOLINE: -2.66M V -500KE; DISTILLATE: -1.11M V -2ME; UTILIZATION: 84% V 82.9%E
- Distillate demand -615K bpd to 3.78M bpd
- Gasoline demand -100K bpd at 8.95M bpd
So distillates had a small build but gasoline had a modest draw and Crude had a very big draw. Normally on this kind of deviation one could have expected to see the Crude Oil Future move upwards over 100 ticks, however their has been some risk aversion in the markets and this is perhaps responsible for the only modest move seen on this huge deviation. During Tuesday the markets went into 'risk-off' mode and the Stock Indices, Commodities including Crude Oil sold off hard. The US Dollar gained across the board. However despite this there was a solid move up and a chance to get an entry on a news afterspike trade. Being aware of the larger trend downward on the Crude the move up caused by the news in the end turned out to be a good opportunity to short into this downtrend at an better price.
On the included chart on the top we can see that the Crude Oil Future after providing an excellent spike trading opportunity using the super-fast autoclick trade entry software from Fast Economic News, making roughly a 50 tick move. After this the Crude Oil Future did pullback to the 38% retracement of the initial spike move around 82.15 and again went to test its highs around 82.40 for a potential 25 tick move. Deducting a few ticks for spread and to wait for price action to confirm the 38% bounce there was at least a potential for 10-15 ticks easily, possibly 20 if you are quick and nimble. Price came back down after retesting and slightly breaking the initial news spike reaction highs by a few ticks and poked below the same 38% and then made a greenbar. This may have started to look like another entry off the same 38%, but after a fib has worked once, the chances of it working again decrease, but if an entry doesn't work just use tight stops, they quickest way to make up for a loss is to get out and look for other trades, the wrong thing to do is sit there and hope....in the fast moving Crude Oil market, especially after news a trader does not want to get in a situation like that. Crude can move fast and giving a trade a few more minutes to turn around and come back to breakeven is risky. A few minutes later price reacted around the 61-78% levels around $82, and a potential scalp entry long. There are 2 potential exits, the first around 82.20 would be preferred - Make your money and get out. However some may have been more patient and held on thru 2-3 minutes of slight pullback and consolidation and rode out the long for another 15 ticks or so. As long as the stop loss is brought to breakeven as soon as possible then a trader can relax and just let price action run its course.....look at the last chart as the news became history and the trend down in crude reasserted itself.
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