Market News & Analysis
How WTI Has Traded Following Bullish Spikes Of The Past
Matt Simpson September 17, 2019 9:04 AM
With oil prices exploding higher yesterday, we take a look at how WTI has performed following similar spikes of volatility.
By yesterday’s close, WTI futures enjoyed their 5th most bullish session according to Reuters data going back to December 1984. If prices are to remain elevated, it will surely put an extra strain on growth numbers as costs to consumers and businesses rise, which inadvertently brings along inflation. However, today we’ll look at how WTI prices traded higher levels of bullish volatility.
Please note, the table on the left shows the top 30 bullish days using close to close data, whereas the right hand chart shows the forward returns of the top 30 excluding yesterday’s close (so there will be minor differences between the two, although the underlying analysis remains consistent.
- It appears that bullish spikes don’t necessarily lead to bullish trends over the week following a bullish spike.
- Average returns were also bearish over 50% of the time, one week later.
- 20 days later (around 1 month) shows a positive expectancy for median prices, yet negative on average (so a few outliers have dragged the average down). However, average returns are bullish over 50% of the time.
- Average and median returns are clearly positive three months later, over 50% of the time.
To look at the data in a slightly different light, we measured % gain from the prior close to the daily high. This is to better capture the volatility of the session, along with the initial gap higher. This places yesterday’s rally as the 15th most bullish session from the data set.
- The pattern remains similar, in that average and median returns are negative for up to a week after a bullish spike, whilst also producing bearish returns over 50% of the time.
- There’s a slight positive expectancy on median returns one month later, although average returns are again negative.
- Three months also shows a positive expectancy for average and median returns, over 50% of the time.
From this basic analysis, it appears that that bullish spikes haven’t favoured continued gains over the near-term but could signal a bullish resumption around 3 months later. In some ways this makes sense, as a price shock can lead to confusion and uncertainty, making prices vulnerable to whipsaws and / or retracements.
US Energy Stocks See Largest Rally of the Year on Saudi Drone Strikes
Saudi Oil Attacks: WTI levels to watch
Oil ‘supply shock’ in context
WTI Flies High Following A Drone Attack On a Saudi Oil Facility
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.