Wednesday, July 22, 2009

Oil Up Or Oil Down?

Looking at the chart of light sweet crude today. We have two options.

1) Up scenario - are we in a 5 wave corrective move up? The count looks good and places the target price in the yellow box between 76 and 86. A price of 78 completes a 38% retracement of the whole fall from 147. The indicators seem to favor further strength. RSI is taking out a trendline and moving thru 50, MACD appears to be getting a bull cross on and S Sto is headed up. All have plenty of room to run.

2) Down scenario - completed a near perfectly measured ABC corrective move stopping just short of a 38% retracement. Crossed under the 30 and 45 ma's that have tracked the price so well thru this chart. Look at the 147 top and see what happened the last time these two ma's crossed. Well, $WTIC is trading under these two ma's and they appear to be headed for the bear cross. After $WTIC broke the lower channel line, it has come back like a champ for the backtest of the trendline and should meet resistance from the 30 and 45 ma's.

Two pretty good cases I'd say. Stuck in the middle I'd say. Hard to lean on any further strength given global demand and over supply. Hard to go against prices continuing to climb given the price demands from foreign countries relying desperately on higher priced oil (that was a nice way of avoiding price manipulation discussion but still including it).

The indicators do not favor a further move south, so I am going for option 1 with oil shooting for the target box. Then it can crash cause the price per barrel is total bullshit anyway. Back on July 8th I did a post $20 Per Barrel Of Oil?. I suggest you review this wonderfully article laden post on oil price manipulation. Folks, we're talking more than the price of a commodity here. Governments live and die on the price of this stuff and it effects your cash as well.

I have two preferred quotes from that spectacular blog post. From the WSJ article, " "In Washington, the Commodity Futures Trading Commission, the main U.S. futures-market regulator, said it is considering tougher regulation of oil-futures markets. The proposed rules, which drew immediate criticism from traders, would seek to curb the influence of speculative investors such as hedge funds and investment banks by limiting how much money any single trader can bet on any one commodity at a time." OK, for those that there really is not any price manipulation going on, they are just trading the shit out of it and where the chips fall they fall - LOL - Bullshit I say.

And the best was from Naked Cap with Verlerger on Oil Glut: "There has never been anything like it". "For eight straight months, oil supplies have been running about 2 million barrels a day higher than the global demand of 83 million barrels a day, Verleger said. Eventually, he and others predicted, suppliers will tire of paying to store all of the surplus oil and flood the market. "That is the largest and longest continuous glut of supply that I have seen in 30 years of following energy prices," Verleger said. "It's a huge surplus. There has never been anything like it."
Anyone care to do the math on that?

So we go up then down or just straight down? You tell me. You know I am in the if you can't beat 'em join 'em camp. (I'm really gonna follow the indicators north till they turn then I will get short unless further weakness happens here - look for the target box)

Thanks for the views and GL trading.

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