Monday, March 14, 2011

First Half of March WTI - March 14, 2011

*disclosure will be limited to performance numbers by end month enjoy for now*

The Past Months of WTI:

1 Month - Hourly

1.) the onset of the Libyan protest (first move up)
2.) Consolidation period interim government claiming control
3.) Consolidation breaks down as Civil War irrupts (second move up).
4.) Speculation of OPEC relief + US relief of excess reserves. The announcement occurs price tumble.

At Point 4. I expected wedge formation to upside break-out just like consolidation point 2. See HERE - for my rationale. My biggest fault was not weighing in supply considerations strong enough in light of OPEC's seriousness. I was lulled in to an "economist's " comments on the unlikely chance OPEC would intervene so soon. More reasons to why economist shouldn't be trading (and to my stupidity for believing it).

Looking at a Daily Chart one should have seen how the up move from week to week basis was unsustainable. The double top higher lows should have been indicative.

My trades accordingly for March: 

Two Week - Hourly

Complete utter destruction for week two on paper. Week I had a higher concentration with more trades, so  the two weeks were pretty neutral. 

From here on out:

Ok bullish or bearish in terms of trend I won't say. However with this BIG drop I expect a decent sized relief rally. The danger of such trades is they will ALWAYS move against you. Typically not a good idea to trade such a big move down.

Despite this, I'm stickin' to my guns and relying on longer term support and short term expectations not being met in supply numbers. We should get some upside volatility. To make up such a large deficit in a short term may not be possible depending on the efficiency of OPEC. A contrarian play if you will... 

Risks to upside: 
  • OPEC over producing
  • Slow Asian Growth (AUD rate hold, Slower regional trade etc...)
  • Questionable US economic data on growth prospects 
Possible Drivers to upside:
  • Growth prospects of New Zealand and Japanese growth prospects
  • Continued Chinese Demand
  • Missed Supply Expectations
  • Growth surprises

I have been bullish on crude since second half 2010 mainly on technical trends and fundamental underpinnings. I believe those have not changed, the recent moves up were on speculative geo/political risk sentiment moves (of course directly tied to supply). However ask the risk comes off we will get a return to fundamentals. It is not a bad idea to hold Crude LONGER term out. 


Alexander LĂȘ
Managing Partner
Analyze Capital LLC

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