FxWirePro: WTI crude takes support at 43.17 in rising channel – long term oil traders buy at dips with married put

Please be noted that the WTI crude oil taking supports at 43.17 levels from last couple of days.

For now, the commodity has been well above 21DMAs especially after the formation of “Dragon fly” doji on monthly.

WTI crude oil prices showing more strength after the talks between Saudi Arabian and Venezuelan oil ministers on oil production freezing.

Although the buying momentum has been reduced as leading oscillators are not indicative of prevailing price bounces, it would be very risky bets to expect dips below 43.17.

In addition to a bullish pattern candle such as dragonfly doji is traced out at 33.75 on monthly plotting, this has been able to prop up prices effectively after breaking major resistances at 37.53 and 41.82 levels (see for volumes conformity when prices pushing up vigorously).

Bulls on daily charts seem fatigued from last couple of days but bouncing back at these support levels (43.17). But intermediate trend of this commodity shows a short term targets near the recent highs of 46.76 levels as long as 43.17 holds firmly and on the contrary, if it breaks below may need some attention as it may head towards $41.84 levels.

Hence, medium to long term crude oil traders who wish to invest in this commodity are advised to seek cautiously a better entry points (wait for dips) and affix an at the money -0.49 delta put option of equivalent quantities of outrights in underlying commodity, keep an expiry as long as they wish to take physical deliveries.

This strategy is usually to be employed when commodity trader is bullish on crude at this juncture, but slightly suspicious of uncertainties in the near term.

By adding this extra option position safeguards underlying portfolio but loses would be minimal and maximum to the extent of premiums paid to buy ATM options. Maximum loss occurs when the WTI price dives below spot commodity prices at expiration.