Play is any way you like, perhaps even a quick options trade in USO if that’s your thing.
Very low risk / high reward trade getting long oil here.
I follow /CL futures, and see a pretty solid level of support here, and in the short-term time frames – a solid move higher shaping up.
Go easy, make nice.
Why Oil’s Technical Setup Screams Higher Prices Ahead
The oil market is setting up for what could be the most decisive move we’ve seen in months. While everyone’s distracted by the noise in equities and crypto, crude is quietly building the foundation for a monster rally. The technicals don’t lie, and right now they’re screaming one thing: get long or get left behind.
Support Levels That Actually Matter
The /CL futures chart is showing textbook accumulation patterns at these levels. We’re sitting on support that’s been tested multiple times and held firm. This isn’t some random line drawn by weekend warriors – this is institutional money defending a level they believe in. When big money steps in to defend support this aggressively, you pay attention.
The intraday action tells the real story. Every dip gets bought, every fake breakdown gets reversed within hours. That’s not retail traders hoping for the best – that’s smart money positioning for what they see coming. The weakness we’ve seen has been methodical, controlled, and most importantly, bought at every meaningful level.
The Dollar Backdrop Changes Everything
Here’s what most traders are missing: oil doesn’t trade in a vacuum. The dollar’s recent weakness is creating the perfect storm for commodity strength. When USD weakness accelerates, oil becomes the beneficiary. It’s basic math – weaker dollar makes commodities more attractive to international buyers.
This isn’t just technical analysis wishful thinking. The fundamental backdrop is shifting in real time. Supply constraints haven’t disappeared, demand is holding stronger than expected, and now we’re getting currency tailwinds. That’s a triple threat that oil bears simply can’t overcome.
Risk Management for the Oil Trade
The beauty of this setup is the risk-reward ratio. Your stop is clearly defined by the recent lows, and your upside target is wide open. That’s the kind of asymmetric trade that separates professionals from amateurs. You’re risking dollars to make tens of dollars – maybe more if this thing really gets moving.
For those playing USO options, the leverage can amplify these moves significantly. But remember, options decay, so timing matters. The technical setup suggests we won’t be waiting long for confirmation. When oil breaks above the recent consolidation highs, that’s your green light for heavier positioning.
The Bigger Picture Nobody’s Talking About
What’s really driving this isn’t just technical patterns or currency moves. We’re seeing a fundamental shift in how energy markets operate. The old playbook of endless supply growth isn’t working anymore. Capital discipline in the energy sector has created a supply backdrop that’s much tighter than headline numbers suggest.
Meanwhile, geopolitical tensions continue simmering beneath the surface. Any disruption to supply chains or production facilities could send oil prices parabolic overnight. That’s the kind of rally setup that smart money positions for before it happens, not after.
The seasonality factors are also lining up perfectly. We’re entering a period where energy demand typically strengthens, and inventories are already below historical averages. That’s not bearish – that’s a powder keg waiting for a spark.
This oil trade isn’t about getting lucky or riding momentum. It’s about recognizing when multiple factors align to create genuine opportunity. The technical support is holding, the dollar is weakening, and the fundamental backdrop is tightening. When those three elements converge, you don’t question it – you act on it.
Keep your risk tight, but don’t be afraid to press when the setup confirms. Oil is about to remind everyone why it’s called black gold.
Thanks Kong! Appreciate the “Actionable idea.”
I’ve been buying some BP the last few weeks so this is a nice tailwind.
Nice work Jworthy.
As per my criteria, this looks like a very solid trade.
Don’t get married to it – but risk vs reward here looks like a no brainer.
If you look at oil seasonality as well the next few weeks make for great long trades. I’ll be reloading an cl futures contract soon again
That’s got us on the same page man…..as per usual.
As well for all reading – Careydina and other AUD/JPY shorts.
I’ve scratched the trade for a couple pips – and see that markets may be setting up for a “feeble push higher” as USD now showing weakness.
My feelings are…..I could easily hold AUD/JPY but imagine that she “might pop” back to the high end of the range around 94.00 so…..bank a couple bucks, reduce market exposure and get “back on the hunt” for another entry short.
No change in bigger picture thinking…just a short term squiggle that I’ll take the time to bank / wait / re load.
I hope it helps.
Yep Kong, aud/jpy very quiet these 2 days. So i closed all positions and wait for the next one 🙂 thanks
OK Careydina ya….a couple pips on either side, as AUD sits “flat” for the most part.
Give it a day er two, reduce exposure , and go out and do something fun!
It “will” come – just long enough grinding sideways for me.
Kong,
I like that play. Thanks for the heads up!
Boom!
Go easy…..watch it another day even but…..
Kong say buy!
He he he….
thanks Kong – picked up USO after your call – hammer candle ish today – looks like great risk reward trade
You know me…..more time “out of markets” than “in” so….
Hope it’s a good one for ya.
UCO not USO – more kick
Email from your boy Gary Savage to his AP subscribers 2PM EST:
I just noticed that oil has signaled a failed IC today. Again I have to wonder if oil is leading the stock market into
a correction. For those interested there could be a possible short trade in oil for the next 3-4 weeks. I’m guessing oil would bottom at roughly the same time as stocks, and stocks should have about 20-30 days before the ICL is due.
( Poor guys been on a real bad run lately. )
Kong, I don’t know anything about forex but I read your blog everyday…Informative and damn entertaining dude! thanks
(UCO Feb 28 calls…I leverage like a gorilla!)
Don’t leverage like a “_______-“!
I don’t leverage / risk jack squat so……read / laugh / contribute….but go easy when trading!!
What’s wrong with a little leverage? You telling me you made 130% last year without it? And by the way….what’d jew call me?
Lol…..too funny, yes yes it’s a part of trading and too be respected.
To be honest – I rarely expose more than a third of my actual capital so for the most part – don’t “really” use leverage.
But I have been known to step on the gas here and there as well..
He he he…..be safe ma man!
Kong what’s your feeling on CAD being influenced by oil price. Just feel that CAD has fallen and is due a bounce. And with the oil price looking to bounce this could tie in nicely with some CAD pairs. mainly looking at AUD/CAD weakening soon.
Interesting pair choice, and considering I’ve got firm belief AUD is moving lower – makes sense.
However – NOT at this particular junction / certainly not today / tomorrow / next day.
97.50 areas looks good to me – so I’ll throw it on my radar ( as I normally don’t trade two commods against one another ) and will post as to when I see it making the turn.
ok thanks for that just need to be patient
You bet….great trade idea / concept……but I’m sure you’ll get a better entry.
Lets look for 97.50 even 98
Thanks for the tip on AUDJPY. I locked in some good profits with CADJPY and some…kinda lame profits with AUDJPY but green is green. Hey you don’t trade USDCAD much do you? Potential reversal it looks like. I guess the two economies are so closely linked its a bit like a European vs European currency trade? Just not sure how short will perform in a risk correction.
USD/CAD is a pain in the ass man…
As it stands ya….it looks ready for “correction” – ya but to where/what??
Endless range with occasional spikes in “either direction”. No real rhyme or reason based on USD moves / fundamentals and ya – geographically / trade / linked etc NOT being top of my list.
BUT…..
It does look like a decent short term trade.
Kind of affirmed what I was thinking. Probably won’t bother. Thanks for the input!
I’d keep an eye on it…but I’d have a bit of a wait before thinking of going short USD/CAD
Thanks! I took 30 ticks on a quick short today. Will be watching tomorrow.
Hey Dr. Kong,
AUD/USD setting up here for a move…. direction yet to be determined but have a full range of set-ups running in multiple Time-frames…. and finally a daily squeeze set-up! Will see how the lower TF fire off & will scale in from there…..
Cheers Schmed,
Something brewing in AUD/USD……. Will see how the lower TF’s fire off as I have set-ups running & even the Daily is working on something for us here…..
I’m an Aussie bear.
Long the Aussie…. 🙂 will bail if I am wrong but positive fires lighting up here….
What do you think of gbp/aud
Will it drop 200 pips before rising again
long PM’s as well but have been for over a week now….. we will see how this plays out….:)
Cheers Schmed,
Ya it kind of looks like the technical and fundamentals for PMs are starting to line up
Looking like yen bottom is in…..at least for a little while. Big jobs miss. Dollar crumple?
Daily Aussie Squeeze still running – once it fire’s off then I will look for the move to complete & dump…. should run a couple more days one would think…
Cheers Schmed,