When WTI is in a uptrend, and then suffers a sharp correction, as we have seen this past week, it has been a good time to speculate on a snap-back rally.
Here you can see a daily chart with the 3PC 23 adaptive channel clearly up, while price has crashed below. This is accompanied by our price oscillator approaching a buy signal. For the oscillator, it's not only important to reach extreme levels, but we like to see a spread of at least 15 between the fast and slow line - this signals we have moved too far too fast and due for a retrace.
Now we want to quantify odds and want to measure each instance where WTI has a upward sloping 23channel, and with price closing below it.
We can see this setup has triggered 195 times going back to 2000, with price moving $2.79 up vs $(1.20) down in the 70th percentile 20 days forward. This is 2.5-1 odds favoring longs.
Sep crude has made a nice intra day reversal today, confirming this thesis, and it is time to speculate long.
We are buyers of the Sep 68 by 71 call spread, while sellers of the 62 put. The cost of this is approx 50cents with a Delta of .36 - Your upside is $2.50, provided WTI stays above 62, for a R/R of 5-1.