Crude to $75 Profit TargetYou all know I'm a 100% Chart driven trader.
But of course I also have my fundamental thoughts.
Here is my layman’s fundamental thesis:
I do not believe that Venezuelan oil will flood global markets, just because they grabed Maduro. On the contrary, the opposite is more likely. Venezuela’s production is dominated by heavy and extra-heavy crude, which is costly to extract and difficult to refine. As a result, an oversupplied market is unlikely from this point of view.
But with a U.S. military invasion of Iran could be very likely to drive oil prices higher, potentially sharply so. The effect would stem from supply risk, transportation chokepoints, and market psychology I think. Even if physical supply disruptions were initially limited. My experience is, that short-term crazy price moves are often driven by psychological factors.
So, in short:
1. Risk to the Strait of Hormuz (Primary Factor)
2. Potential loss or Threat of Iranian Oil Supply
3. Spillover Risk to Other Producers
4. Speculation and Financial Market Reaction
5. OPEC and Strategic Reserves Probably Very Limited
Sure, the magnitude would depend on duration, scope, and whether shipping through Hormuz remains uninterrupted, but upward price pressure would be immediate.
Timing is always the most difficult part. That’s why I would look at a trade with a horizon of at least three months, or longer (likely using ITM LEAP options).
The chart needs to confirm my thesis.
First, I want to see a break of the descending pressure line (red).
Next, the CIB line must be broken.
Finally, a sign of stabilization above the CIB line would serve as my entry signal.
That’s it. My stalker hat is on.
