Trading the Crude Oil Inventory Report

Trading the Crude Oil Inventory Report

Trading the Crude Oil Inventory Report can be quite exciting, or not. Often, Crude will move at least eighty cents immediately after the report but sometimes it simply falls flat. Let’s look at where Crude may go tomorrow after the report.

Trading the Crude Oil Inventory Report
Trading the Crude Oil Inventory Report Getty Images

Trading the Crude Oil Inventory Report

The daily Crude chart below shows that the stochastics is oversold with a reversal bar forming to the upside indicating that price should retrace back to the ATR (red plus sign) at around $48.52.

Trading the Crude Oil Inventory Report

Looking at a lower timeframe, 180 minute chart, we can see that a congestion area has formed because there is a line of gray dots with a blue ATR under price.  The blue ATR at $45.89 should act as support for Crude to go up (with confirms what we see on the daily).

Trading the Crude Oil Inventory Report

If price manages to break through the congestion dot (gray dots) at $46.67, then the next test should be around $48.50, which also confirms what daily ATR area.  Additionally, there is hidden divergence because price is making higher lows and the stochastics is making lower lows.

How can a trader take advantage of this potential upmove?  There are a few ways to trade this.  A trader could use OTM binaries to lower their risk using two hour, daily or weekly binary options.  Additionally, the trader could wait for price to break through the $46.67 area, then retrace, and, after support has formed, enter an ATM binary using a daily or weekly binary.

Since Canada happens to be the world’s seventh largest producer of oil, it is highly correlated with Crude Oil.  If the value of Crude increases, the value of the Canadian Dollar also increases.  However, since the USD is the first pair in the USD/CAD combination, the currency will move down when Crude goes up (ie the US Dollar weakens as the Canadian Dollar strengthens).  The only exception to this correlation is when the Canadian Dollar has a high volatile market report at 10 am on the same day as the Crude Oil Inventory Report.  Because of this correlation, traders have additional trading opportunities for the Crude Oil Inventory report.  Here’s the difference between the two.

The strike widths on Crude binaries are:  twenty cents on the 2-hour, fifty cents on the daily and a dollar on the weeklies.  The strike widths on the USD/CAD are:  ten pips on the 2-hour, twenty cents on the daily and fifty cents on the weekly.  Plus, the USD/CAD has six daily expirations to choose from versus one daily on Crude.  Since tomorrow also brings the quadruple FOMC, Crude may not have a significant move until after the FOMC announcement.  Therefore, trading the USD/CAD may be a better option because the strike widths are smaller and there are more binary options available.

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