Over the past few months, we've seen oil lead the way on a crash and we've seen equities follow suit. In mid-December, we were able to play a bearish wedge breakdown despite a production cut from OPEC which failed to support prices. Since then, a dip to the $42 level was bought with ferocity before the price stabilized over the past couple days.
Fundamentally, a bullish case for oil from these prices remains intact as the OPEC production cut has yet to go into effect (it begins in January). Also, It is likely that US producers slowed production as oil prices dipped since a majority of the smaller producers cannot make money at price points lower than the $45-50 range.
Technically, we are likely seeing an inverse head and shoulders begin to form on the oil chart (much like one just did on the chart of the S&P 500). As illustrated above, I think we can be buyers of oil on a breakout of the trendline (currently at $46.25). I have 3 upside targets that I think can play out before we need to re-evaluate the charts.
Buy oil (USO ETF or CL futures contract) on a break of the trendline above
Target 1: $48.25
Target 2: $50.55
Target 3: $51.90
Stop: $44.30
Fundamentally, a bullish case for oil from these prices remains intact as the OPEC production cut has yet to go into effect (it begins in January). Also, It is likely that US producers slowed production as oil prices dipped since a majority of the smaller producers cannot make money at price points lower than the $45-50 range.
Technically, we are likely seeing an inverse head and shoulders begin to form on the oil chart (much like one just did on the chart of the S&P 500). As illustrated above, I think we can be buyers of oil on a breakout of the trendline (currently at $46.25). I have 3 upside targets that I think can play out before we need to re-evaluate the charts.
Buy oil (USO ETF or CL futures contract) on a break of the trendline above
Target 1: $48.25
Target 2: $50.55
Target 3: $51.90
Stop: $44.30
Trade active:
Trade is on
Comment:
A bit of whipsawing, but this trade is now profitable.
Trade closed: target reached:
Target 1 hit. Taking a lot off here, but target 2 and 3 a strong possibility.
Comment:
Target 2 hit
Comment:
Target 3 hit