“Fun Unlimited” is the word I would use to describe the pre-OPEC market environment. Let us revise the oil price action since early Asia and you would understand why I say it is “fun unlimited”.
Saudi’s said over the weekend the oil output cut deal may not be required. In response oil prices fell at least 1.6%. When I woke up early morning at 5 AM IST, the first thing I did was check oil prices.
By early Europe, Oil had recovered losses and was trading moderately positive. All the effort was in vain as prices fell 1% again by mid-Europe only to stage a recovery again.
News hit the wires in the US session that Saudi Arabia, the group’s de facto leader, has offered to cut 4.5 per cent from its production levels of about 10.5m b/d in October. However…. Yes, there is always that ‘however’ thing with Saudi and OPEC. However, Saudi insists that Iran and Iraq accept large cuts.
Oil prices currently trade at least 2.5% higher on both sides of the Atlantic. Don’t be surprised to see oil down 4% tomorrow if we get a bearish soundbite.
Being very very flexible is the trick to trade OPEC meeting
The very idea of trading the OPEC event demands extreme flexibility. One needs to switch trades as per the quality of soundbites – Bearish/Bullish. If you are not comfortable trading oil, you may consider the USD/CAD pair.
Let us look at the daily chart of the USD/CAD pair
I see following patterns on the daily chart –
Sideways channel (green)
Rising channel (red)
Small symmetrical (black)
As of now the pair has breached the symmetrical triangle on the downside. Earlier this month, we also saw a failure to capitalize on the bullish break from the rising channel.
In case, the daily close is inside the sideways channel (green), the odds of a further retreat to 1.3250 would rise.
On the higher side, I would be comfortable opening long positions only if I see a break above the Friday’s high of 1.3535.
However, as I said earlier, play the OPEC soundbites!