A view on commodities

Friends, forget crude. Watch lead.

Not traded Lead for a long time... Metals, I watch/trade Zinc and Copper. Since you mention, will check the charts of Lead. Anything special happening.

DSM

Has the short term trend for crude changed or it is still uptrend?


Please advice and reason with help of chart.

Narangji,

Suggest look at the 5 day 60M chart with 20 EMA. Since 5 days, the EMA line is green. If you cannot look at this chart on your platform, I will post.

NG data :

16/04/2015 20:00:28 : EIA natural gas storage change Exp {+47.83 B }; Prior { +15 B }; Actual {+63 B }

NG Storage was expected to be +47.83, whereas actual is +63, which is bearish data. NG down 5K post release of data.

Since I have no idea how to plot EMA for 20 days, I clicked chart drag and dropped EMA to chart and selected 20 as period

Hope I did it correctly, also can u throw some light on how to read a short term trend, if i see from last 5 days its a clear up trend with a pullback coming in/retraction coming in.

Please advice/confirm to boost confidence.

Narangji,

It appears your chart is hourly, with 15 EMA. It is fine, whichever EMA/SMA you use, you will get some good signals in one sometimes, and sometimes in the other....

If you see the chart, the MA line is moving up. There are not many candles in retracement and Pivot levels are holding fine. So at the moment the hourly trend in crude is definitely up. But as you trade the markets in the long term, you will experience that it does not take much time for the trend to change from bullish to bearish or vice versa.....

Narangji,

Suggest look at the 5 day 60M chart with 20 EMA. Since 5 days, the EMA line is green. If you cannot look at this chart on your platform, I will post.


DSM when you said 5 day with 60M? what is 60M, is it diffrent from hourly chart?

Narangji,

60M= 60Minutes in short, which is hourly chart......

Source-- http://oil-price.net/en/articles/how...-oil-price.php

Discrepancies in crude oil pricing are speculators' bread and butter.

Contango and Backwardation

You would expect that the forward price of oil should be a prediction of what the spot price will be on a certain date in the future. You should be able to look at the 3 months forward price today and expect that experts are saying "this is what the spot price of crude oil will be if you check again in three month's time." However, this is not always the case. Sometimes, the forward price of a futures contract can be higher than the expected future spot price as well as the current spot price. This situation is called "contango."

The opposite of contango is called "backwardation." This is where the forward price is lower than the expected spot price. Both contango and backwardation send signals to technical analysts and generate instructions to buy or sell contracts that have nothing to do with real-world demand or supply. In normal conditions, most futures contracts are in backwardation, because the buyer would otherwise have no incentive to commit to a future purchase.

In effect, the futures contract offers the buyer a discount on the expected spot price and the contract's existence provides the supplier a guaranteed sale, which is worth the loss of a small part of future income. A contract will go into contango if the commodity to be provided is expected to become difficult to source around the date of the contract's maturity. Thus, the buyer is prepared to pay a little more in order to secure future supplies. The predicted spot price is calculated on analysts' expectations of the scarcity or abundance of a commodity on the contract's date of maturity. Therefore, contango is a rare occurrence and happens when a market suddenly turns due to an unforeseen event, creating shortages that experts didn't expect at the time the contract was negotiated. Those shortages could be caused by a Civil War, disrupting production, a shortage of tankers to transport the oil, or an unforeseen rise in the cost of storage, due to overproduction.
Example

Contango occurs where a producer creates an agreement with a buyer so that the sale will happen in three months time at a price of $45 per barrel. The current (spot) price is at $50 per barrel, but both the buyer and the seller were advised that the price of oil will fall in the next three months. After completing the contract, the buyer then receives a call from a broker, who offers to buy the contract for an equivalent price of $55 per barrel, so the futures contract is now worth more than the price per barrel written into the contract.

If a broker calls the buyer and says "hey, buddy, I'll take that contract off your hands, but I'm only going to $42 per barrel, and you pay me the shortfall now," then the contract is in backwardation. As the delivery date of a contract draws closer, the value of the contract will draw closer to the expected spot price on the date of maturity. Thus, the broker that bought the contract in contango will lose money. Contango and backwardation generally occur when producers and suppliers suddenly find themselves in desperate need of immediate cash and are prepared to take a loss on their obligations in exchange for immediate payment.

You may hear that oil market is currently in contango. However, when oil market analysts use that term, they use a slightly different definition to that used for contracts.


Read more at http://oil-price.net/en/articles/how-markets-influence-oil-price.php