FxWirePro: After stern bearish engulfing WTI crude on the verge of hitting fresh 18-months’ lows – Uphold directional hedging

The previous month (May'19) has been apprehensive trading for crude oil. The price trend of global benchmark, WTI futures, dropped considerably more than 15.91% last month, evidencing its worst monthly performance of 2019.

Technically (WTIcrude), we raised a caution of back-to-back shooting star & spinning top occurrence that is coupled with overbought pressures signaled by the momentum oscillators hampering the previous bullish sentiments (referring to weekly plotting about a fortnight ago).

Consequently, bears managed to plummet prices below WMAs with 3-black crow pattern comprised of stern bearish candles with big real bodies.

Even on daily terms, ‘Evening Star’ at 71.58 levels was spotted out to signal weakness, furthermore, shooting star & hanging man patterns have plummeted the prices way below DMAs.

The RSI and Stochastic curves, on all timeframes, are showing the downward convergence to these price slumps to indicate the intensified selling momentum. To substantiate this bearish stance, bearish DMA, EMA and MACD crossovers indicate the downtrend to prolong further.

Fundamentally, weaker oil prices pose a challenge to the OPEC (Organization of the Petroleum Exporting Countries). Later this month, the association and its Russia-led allies, in addition, will assemble in Vienna to reassess the global demand/supply equation for the rest of the year.

Prices had spiked as much as 33% during this spring upon the pact to curb oil output late last year. However, the potential economic slowdown in China and apprehensions about the Trump trade policies are threatening oil price prospects (sanctions on Venezuela is extra pressure).

For now, the concerns on shrinking global demand for oil, crude market participants have got challenging questions about supply as to how much banned Iranian oil is reaching foreign refiners?

Updates on crude oil derivatives trades: In crude oil segment, we initiated a risk reversal strategy by going long in Brent Dec’19 10D call versus short Dec’19 10D put. They also went tactically short Brent-Dubai Q3’19 swap spread due to mounting risks from Iran sanctions. 

In addition, we activated Brent crude directional hedge, by adding shorts CME WTI futures for June delivery for arresting downside risks in short-run, simultaneously, longs in CME WTI futures of August’2019 month deliveries.

Currently, at spot reference of Brent: $51.73 levels, as the market tone is troublesome, we note that the continued decline in crude oil with WTI testing fresh lows in the minor trend and threatening $50.30/bbl or below levels that makes the energy commodity dancing exactly as per our whims and fancies.

Hence, we wish to uphold the same positions now with a view of arresting both swings directionally. 

Currency strength index: FxWirePro's hourly EUR spot index is inching towards 83 levels (which is bullish), while hourly USD spot index was at -144 (highly bearish) while articulating (at 13:22 GMT). 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex