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Potential Break On WTI

May 10, 2011 6:03 AM ET
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The LFB's Blog
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News wires are highlighting margin requirement increases in crude oil markets, which follow recent bullion market margin increases. Middle Eastern unrest is still on the docket as another reason for oil price volatility. US oil inventories have been better than expected recently, which has helped maintain uncertainty over fair value. TheLFB client notes have called for consolidation at support above 95.00 on WTI.

Potential signals to buy WTI from 99.50 were forming on Monday, but failed to confirm that both potential and momentum would be strong enough to easily follow through on Monday. A tradable call to action is again close to forming on WTI, with a trade signal that looks to buy WTI with a break of 102.00. Initial targets will be 103.60 and 105.80. Clients will be notified when price action breaks, and holds.  

Sentiment towards WTI trade remains bullish. Price action favors a bounce off support that buys the recent dips. Caution is required if looking to sell crude oil as TheLFB trade desk is not expecting a collapse of WTI below 95.00, or USO (the oil services exchange traded fund) below 37.50.

Price Action:
There was strong buying activity at 97.00 support on WTI recently, which is a potential price reversal area of note. This swing point area, where a near-term trend forms and price action reverses previous trade direction, will be closely monitored and market alerts sent to subscribers if support breaks.

The daily trading range is $2.70, which is above the historical norm and confirms that fair value has still not been found on crude oil. The 50-day Simple Moving Average (SMA) is @ 106.40. The 20-day SMA is @ 105.60. WTI has a 36-month 75% correlation to S&P moves, and a 90% correlation to the euro currency pair (Eur/Usd).

Trade Plan:
The detail below will help guide traders with analysis on intra-day price movement, trend, and momentum. Content provided by TheLFB Trade Plans.


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