FxWirePro: WTI Crude On Verge Of Retracing 50% Fibos Of 2018 Highs – Oil Derivatives Trades Radar

Global crude oil price sentiments are extremely weaker of-late, with WTI crude staged for 2nd week’s losses about -5.9% and Brent head for losses of 3rd straight week, as prices down by -6.74% so far in this week. WTI is currently trading lower for 10th consecutive day at $52.45 level, and no signs of price recovery so far (refer daily plotting).

On a broader perspective also, WTI bears appear to be inclined by 50% ($51.48) Fibonacci level of $76.88 and $26.08 (i.e. 2018 highs and 2016 lows respectively) as from the last couple of months the prices are not going anywhere away from this juncture (refer monthly chart).

Although sharp rallies were observed at the early months 2019 upon but steep slumps below EMAs on bearish engulfing pattern, the current price remain well below 21-EMAs & downtrend continuation seems to be on the cards in the near-terms as both the momentum oscillators signal overbought pressures.

Hence, we come up with some trade updates on crude oil derivatives trades: We advocate contemplating above technical rationale crude oil derivatives trades on hedging grounds. Maintain shorts in CME WTI futures for October delivery for arresting downside risks in short-run, simultaneously, longs in CME WTI futures of December’2019 month deliveries. 

And also a risk reversal strategy by going long in Brent Dec’19 10D call versus short Dec’19 10D put. Thereby, we also stay tactically short Brent-Dubai Q3’19 swap spread due to mounting risks from Iran sanctions.