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The negative formation on WTI gives us a good opportunity to profit from airlines

The global oil producers’ recent comments on their intention to leave the abatement agreement continue to keep the raw material close to $65 a barrel. The Organization of Petroleum Exporting Countries (OPEC) is expected to meet on June 22 at the headquarters in Vienna, along with the non-OPEC Russia, to discuss production policy.

Saudi Arabia and Russia have already said that redundancies could be reduced after receiving invitations from consumers, including the US, China and India, to support global demand.

If Russia and Saudi Arabia reaffirm their intentions to increase production at the forthcoming meeting, oil will surely suffer very serious damages, with prices below $60 being very likely. Otherwise, I do not expect strong support for black gold.

The technical price has come out of the ascending as it is currently hung in anticipation of a foundation that will be decisive for the direction. If Russia and Saudi Arabia confirm the intentions, I expect a first level of support of around $62, if it is overcome then $ 59.80 is a very likely price. As for the net speculative positions of pro-traders, long positions are significantly reduced, while we see an increase in short positions. The price realizes a breakthrough on the upward channel, along with a major horizon and 23.6% Fibonacci correction. 50 and 200SMA are still beaded.

West Texas Intermediate Crude

These negative outlook makes it possible to seek returns on another – less volatile asset group – the shares of the airlines.

Since oil prices have risen, Air France shares (AF.FR) have suffered major decline, with their price dropping more than 50 percent over the same period.

However, as it can be traced back to the previous period, a stable and consolidating oil price (around $ 45- $ 55 a barrel has a positive effect on the company.) Low fuel prices mean lower costs for the company = positive net result.

Because the oil price is currently inappropriate for a short position (big stop), AF shares give us an excellent opportunity for a short stop and a big profit. It’s still too early for lon, so it’s right to wait for a price action alert. Long positions at the moment, albeit tempting because of the low risk, are not appropriate, as here is the rule for the falling knife. We expect the price to rise above 7.78 and after a successful break test we can position a stop at a stop of about 6 euros.


 Trader Aleksandar Kumanov


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