Exactly one week ago, on April 5, energy bulls were celebrating the shockingly large draw down in light crude oil revealed in the American Petroleum Institute's (API) weekly inventory report. That report kick-started the current rally in crude. Fast forward one week, and we're seeing the exact opposite reported by the API. The latest inventory report, released after Tuesday's regular session close, showed a huge build in crude stocks. Analysts were expecting a build of around one million barrels, but the report showed a build of more than six million barrels.
While the immediate reaction following the API data was to sell crude, day timeframe traders should remain open to trading the contract long if it's holding above the session's opening print and the volume-weighted average price (VWAP). And don't forget to keep an eye out for the 10:30 a.m. ET Energy Information Administration petroleum status report.
Readers continue to inquire about International Business Machines (IBM), but unfortunately, I have nothing new to report. I continue to believe higher timeframe traders should remain skeptical of the rally from under $120 until the stock closes above $150 for at least five to 10 sessions in a row. Alternatively, sit back and see how the company's earnings look on Monday, April 18.
Energy traders will recall our discussion of crude futures trading back down beneath the year-to-date VWAP early this month, and then immediately recapturing that reference point. The same pattern just occurred in copper futures. Copper collapsed under the roughly 2.12 year-to-date VWAP on April 7, and recaptured that reference point in dramatic fashion on Tuesday. While I'd like to see the contract close above the 50-day simple moving average as well, I believe copper bulls have an opening to recapture the 2.2 to 2.21 breakdown area.
Since we're talking about copper futures, let's not forget to consider the potential for bullish continuation in Freeport-McMoRan (FCX). The stock traded well Tuesday, and as long as bears don't halt progress near $10.55, we can look for another attempt to push past $11.
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