Crude Oil Trade Idea: Bounce from Support or Rally to $80?
Macro Update
Index futures sold off during overnight trading as market sentiment turned risk-off.
Newswires reported that, after Colombia denied entry to two U.S. deportation aircraft, President Trump announced emergency tariffs of 25% on all Colombian imports, with plans to increase them to 50% next week. Additionally, The Wall Street Journal noted growing support among President Trump's advisors to impose 25% tariffs on Canada and Mexico as early as Saturday to initiate negotiations.
Meanwhile, Chinese startup DeepSeek is challenging U.S. dominance in the AI sector by introducing a low-cost model rivaling OpenAI's o1. This development may intensify geopolitical and economic tensions.
Adding to the unease, Chinese Manufacturing and Non-Manufacturing PMIs missed expectations. Manufacturing PMI came in at 49.1, below the forecast of 50.1. Markets in China and most of Asia will remain closed starting Tuesday for the Lunar New Year holiday, which could lead to lower regional liquidity.
Looking ahead, the week features several high-impact events:
Wednesday, January 29:
Federal Reserve interest rate decision and the first FOMC press conference of 2025.
Bank of Canada interest rate decision.
Thursday, January 30th:
ECB interest rate decision
Preliminary Q4 GDP data (QoQ).
Friday, January 31st:
Core PCE Price Index (Dec).
Crude Oil Futures Update
Our prior trade idea from January 13 played out well, with Scenario 1 materializing. While prices briefly approached $80, crude oil futures have since retreated to trade near the $74 handle.
As we close out January, here’s an updated map of key levels to watch:
Key Observations:
Scenario 1: Down and Back Up
Watch for a pullback toward the key confluence zone from our LIS. A bounce from this confluence zone could offer a strong opportunity for bulls to take long trades, targeting higher levels.
Scenario 2: Rally Toward $80
If prices reclaim the January 2025 mid-range and confirm bullish setups, long trades targeting a move back toward monthly highs in the $80 range may develop.
For risk management during volatile conditions, traders can consider Micro Crude Oil Futures. Managing risk is paramount, as losses are an inherent part of trading.
This week’s data releases, geopolitical developments, and tariff announcements are likely to shape market sentiment. Stay cautious and adapt to new information as it unfolds. Risk management remains the cornerstone of success in volatile markets.
Not confident to incorporate these into your trading plan? Why not incorporate our trade ideas to your trade plan in TradingView and CME’s paper trading competition; “The Leap”.
Index futures sold off during overnight trading as market sentiment turned risk-off.
Newswires reported that, after Colombia denied entry to two U.S. deportation aircraft, President Trump announced emergency tariffs of 25% on all Colombian imports, with plans to increase them to 50% next week. Additionally, The Wall Street Journal noted growing support among President Trump's advisors to impose 25% tariffs on Canada and Mexico as early as Saturday to initiate negotiations.
Meanwhile, Chinese startup DeepSeek is challenging U.S. dominance in the AI sector by introducing a low-cost model rivaling OpenAI's o1. This development may intensify geopolitical and economic tensions.
Adding to the unease, Chinese Manufacturing and Non-Manufacturing PMIs missed expectations. Manufacturing PMI came in at 49.1, below the forecast of 50.1. Markets in China and most of Asia will remain closed starting Tuesday for the Lunar New Year holiday, which could lead to lower regional liquidity.
Looking ahead, the week features several high-impact events:
Wednesday, January 29:
Federal Reserve interest rate decision and the first FOMC press conference of 2025.
Bank of Canada interest rate decision.
Thursday, January 30th:
ECB interest rate decision
Preliminary Q4 GDP data (QoQ).
Friday, January 31st:
Core PCE Price Index (Dec).
Crude Oil Futures Update
Our prior trade idea from January 13 played out well, with Scenario 1 materializing. While prices briefly approached $80, crude oil futures have since retreated to trade near the $74 handle.
As we close out January, here’s an updated map of key levels to watch:
Key Observations:
- On the chart, we can see a downtrend channel after the recent push higher in crude oil. Our blue zone is our LIS (73.65 - 74 zone).
- We see the market pulling back towards the confluence of 2024 VAH, 2024 mid range and 2025 yearly open. This is our key support for bulls to take long trade.
Scenario 1: Down and Back Up
Watch for a pullback toward the key confluence zone from our LIS. A bounce from this confluence zone could offer a strong opportunity for bulls to take long trades, targeting higher levels.
Scenario 2: Rally Toward $80
If prices reclaim the January 2025 mid-range and confirm bullish setups, long trades targeting a move back toward monthly highs in the $80 range may develop.
For risk management during volatile conditions, traders can consider Micro Crude Oil Futures. Managing risk is paramount, as losses are an inherent part of trading.
This week’s data releases, geopolitical developments, and tariff announcements are likely to shape market sentiment. Stay cautious and adapt to new information as it unfolds. Risk management remains the cornerstone of success in volatile markets.
Not confident to incorporate these into your trading plan? Why not incorporate our trade ideas to your trade plan in TradingView and CME’s paper trading competition; “The Leap”.
EdgeClear
P: 773.832.8320 | TF: 844-TRADE20
Derivatives trading involves a substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. The views expressed are opinions, not financial advice.
P: 773.832.8320 | TF: 844-TRADE20
Derivatives trading involves a substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. The views expressed are opinions, not financial advice.
EdgeClear
P: 773.832.8320 | TF: 844-TRADE20
Derivatives trading involves a substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. The views expressed are opinions, not financial advice.
P: 773.832.8320 | TF: 844-TRADE20
Derivatives trading involves a substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. The views expressed are opinions, not financial advice.
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