Crude Inventory: Does it really affect the trend?

As we all have wondered why suddenly there is lot of volatility whenever the clock hits 8’o Clock! And our stoploss gets hit for no reason thus trading in crude becomes tough.

So here we have come out with our analysis trying to relate crude price movement on and after, USA declares crude inventory every Wednesday at 8pm (IST).

MCX Crude Hourly chart of last 10 weeks: (From March 2014 to till date)

This is Hourly chart of MCX Crude Oil with sample size of last 10 weeks. On the above chart we have shown actual crude inventory on that particular week, the previous week data and what is the forecast or expected. The data we analyzed is from www.forexfactory.com. What we found out is really something worth knowing:

By analyzing the chart and trying to make some relation between both MCX Crude Oil price and the actual inventory. We noticed that whenever there is drastic difference between actual-previous week-forecast there is a medium term trend reversal and when with minute difference then minor trend changes. Other thing is most of the time trend changes after 3 to 5 candles.

Now, on 2^nd April when data was -2.4M compared to previous week’s of 6.6M trend reversed due to simple economic formula supply is less than demand so prices rose. Moreover, there was an inverse Head & Shoulder breakout also, which is a bullish sign. On the flip side, on 16^th April, actual data was 10M compared to forecast of 1.3M and trend reversed after 2 days as supply was more than demand and prices fell.

Last week, on 14^th May Crude Oil Inventory: 0.9M, forecast: -0.4M and previous week:-1.8M and thus crude fell for the next 3 to 4 trading days. Moreover, MCX Crude Oil is also affected by USD/INR price.

In the end we can conclude fundamentally that, due to radical change in actual data and expectation or previous week’s data trend reverses.

However, betting on this Inventory data becomes difficult some of the time from trading perspective. But, following simple technical analysis along with Elliott wave counts helps us to find out the reversal signs without looking at any fundamentals.

At current level, from last 7 trading sessions, prices have been stuck in the range. Inventory is due on Wednesday, so what’s the short term wave counts are suggesting ? To capture the next wave in Commodities, subscribe to “The Commodity Waves Short Term Update” which includes MCX Gold, Silver and Copper and frequent updates on Zinc, Lead, Natural Gas. For subscription, visit Pricing page.