How to Trade Crude Oil Inventories

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Video Transcription:

Hello traders. Welcome to the news trading course and the third module news that move the market, profitably enough for us to trade. In this lesson, I’m going to teach you how to trade crude oil inventories, and what we’re going to do is we’re going to go through last month’s data and its release, and then we’re going to go to the empty floor platform where we’re going to see price action on CLF, which is the Crude Oil Futures Contract.

Crude Oil Inventory Reports Economic Calendar

Here, we are at the Forex factory economic calendar and as you can see, this is on May 13th, 2015 at 5:30 p.m., we had the crude oil inventories released. Last month, where minus 3.9 million barrels in stock and we had a forecast of minus 0.1 million. So the forecast wasn’t incredibly good numbered, which I think was very difficult to achieve if you look at the past four months of crude oil inventory releases. The actual number came at minus 2.2 million, which is better than last month, which means that we are going to be looking to sell any crude oil instrument that we are watching. But because it’s worse than the forecast, we might get an initial bullish pressure and then a selling pressure. So this is what you have to be careful with the release.

Crude Oil

So here we are and this is the 4 hour Crude Oil Futures Contract. This is the July 2015 contracts and we are going to watch May 13th at 5:30 p.m., right? So right around this calendar, we are going to go to the hourly, and we are going to look for the actual release on May 13th. And then we are going to go to the 50 minute chart and look for the levels that we are going to be using as profit taking levels and of course as break out levels.

So let me just zoom in a little bit on this chart and the first level that I think that we need to use, remember that price action was trading around here, the first level is this, this high is right here, which you can see that is an immediate level of support that price has been tested heavily. I mean, we tested it here at resistance, then we are testing it here as support and prices trading just 25 ticks above this level before the inventories. Now we have this first level and the level that we need to break, and then we have this level, which is again a level of previous resistance that was tested as support. We tested it here as resistance, remember that resistance is not a straight line, but an actual level, and then we broke above. So these are the levels that we are going to be watching during the release.

Now, let me go through the 1 minute chart and we are going to be looking at the actual range that price was trading at before the release. Okay, so this is the 1 minute chart and as you can see, this is the level of support that we were watching for our first break and the price was traded around 62, 64, at the time of the release, okay. And at the time of the release, we also need to look at the 1 minute range and you can see that we went above the range. Then what we’re going to do, let me just get rid of this horizontal line, its going to be better. We’re going to go candle by candle.

How to Trade Crude Oil

All right. So this is 5:23, and you can see that, it’s actually the last candle or this is the candle of the release. This first candle to the offside limit, just thicken this out for you guys. There you go and you can see that I have put on a vertical line at 5:30 at the time of the release and as we expected, we had a push above or a bullish pressure that broke with the 1 minute range. Now this is a stop hunt, and this also can be a bullish trap. As you can see on the next candle, there is a lot of people that try to go long here but the selling pressure made for an indecisive candle, and the next candle breaks with the range to the inside again. Now this gives us a very nice reversal pattern and we are going to enter short right here. Now let me just show you where exactly we are going to enter short, just by of course coloring our short line red, and we are going to put our stops above these candles high. This gives us a nice 15 tick stop loss and we are going to take profit at the bottom of the range, which means that we are going to take profit at around 48 tick.

Now, you have to know that, for those of you that don’t know, if you are trading 1 contract, 1 tick equals 10 dollars. This means that here we have 150 dollar stop loss for a nice 490 pip win, and as you can see, the next 1 minute candle hits our targets and then we have a corrective move to the upside. Now let me just get rid of . . . No i’m going to keep actually this entry and stop loss, and what I’m going to tell you right here is that you can actually trade this corrective move, but I wouldn’t recommend you to trade it because we already made about 500 dollars with this trade in less than a minute, which is fantastic if you were trading just 1 contract.

But for those of you that like risky entries, you could have traded this corrective move but as you can see right here, we have a stop hunt for those entries or for those short entries right here. We have a stop loss above the previous high. We have a stop hunt that would have taken us out on a loss before seeing price move down. So with the crude oil inventories, you have to be very careful and if you can make 500 dollars trading 1 contract in 1 minute, that’s an excellent result.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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