This overview will demonstrate how to forecast oil price without any trading systems. All you need is to understand easy logic of forecasting. Our aim is to forecast futures contract on American crude oil, quoted on NYMEX.
First of all lets look on a contract specification of the contract – Trading Hours (All times are New York time) – Open outcry trading is conducted from 9:00 AM until 2:30 PM. Altogether we 5,5 hours of trading in the pit and 11 half hour bars – this will be our main period. Oil is traded 5 days in a week – 11*5=55 bars. We will use this values for technical forecast of oil price movement on the nearest week.
Fundamental analysis.
We already know, that demand became stronger after DOE announcement concerning problems with lack of gasoline and diesel fuel on national strategic commercial storehouses. Many traders predict, that within the next few days oil will cost more than 80 dollars per barrel – nonofficial level, set by OPEC. As we already said, main event of the week was report of DOE with information about decrease of all resources. Uncertainty on stock markets and stable dollar were off the game.
In spite of negative beginning of a new trading day on Asian stock markets, oil market proceeded its growth because of technical factors. Analysts suppose, that first powerful resistance level is nearby $78,6 per barrel. In addition, rebels in Nigeria announced about new attacks on oil companies. But oil quotation grow already 7 days, within this week oil raise in price at 8,7%, that may become a good reason for correction because of profit fixation
Technical analysis
For our forecasting we will use:
MACD (11,55,11) – for analysis of correlation dynamics day/week
2 Bollinger bands with periods 11,2 StDev and 55,1 StDev for defining of potential reverse points and zones of buy/sell
As You can see on the chart, yesterdays oil rally were quite expectable. Price pushed away from standard deviation of weekly and daily level, and price raised up immediately. Arrows on the chart are painted to demonstrate possible moments of entry. Checkmarks – to demonstrate moments of partial profit fixation. Moment of second bounce from level of standard weekly deviation was a great confirming signal for buying oil. On 16th of October on Asian tenders oil price is falling , that demonstrates yesterdays rally profit fixation. You can see on the chart, how accurate is MACD and how it indicates price falling after daily MA(11) breakout. At that moment contract is at the medium weekly level (MA55) and it means that we should fix profit from sell contracts.
There are 3 sceneries of further course of events:
- First – bounce from weekly level, price will grow and level 78.65 will be tested again
- Second – price will fall to level of standard deviation of the week, then it will bounce and maximal level will be tested
- Third scenery – price will fall to the control level of 15th October – $75.90 per barrel.
Further price movement is hard to predict without new Market Generated Data