Crude Oil Update

A few of you have been writing in asking me what my opinion is on crude oil so I decided to make this post so that you can see exactly what I am thinking (if that means anything to anyone).

Above is a daily chart of USO which is the ETF for crude oil. As you know I have been long this market based on the breakout of the symmetrical triangle formation which I posted here on this blog well before the breakout occurred. I was somewhat skeptical of buying the breakout 3 weeks ago due to the bearish seasonal that usually kicks in around this time of year but I went and bought USO anyway but with a smaller share size.

As of now I have not taken any profits on my long position because my profit target is much higher. I did however raise my protective stop to lock in a small gain if the oil market decides to head south.

You'll notice in the above chart that USO is now developing a bull flag formation. I do not plan to add to my position due the bearish seasonal that is due around now but if oil does make a move to new highs, I will then raise my stop right below the low of the flag which as of now comes in at around the $39 level. Lets see what happens.

Crude Oil Futures Break Through Resistance

If you go back and read my last post from 5 days ago, you will seer that I was watching the oil market because I felt a move was coming. Well, it appears that the move was to the upside as crude oil futures make an 11 month high.

I bought USO when crude oil futures broke through resisitance. I'm not heavily long this market due to the bearish seasonal that usually kicks in around this time of year. My protective stop is right below this week's low. We'll see what happens.

Crude Oil Trades Below Support

As I pointed out yesterday, the crude oil chart has broken down technically. Yesterday USO took out a major uptrend line as well as breaking down from its consolidation pattern. Today USO violated the low from a few weeks ago which makes the next support level come in at 31.50. Notice the heavy downside volume coming into this market today and yesterday. The bears appear to be gaining momentum here but like I said in yesterday's post, I'll remain on the sidelines.

Crude Oil - Breaking down?

USO was down 5% today closing on its low. You'll notice in the above chart that USO has just broken down from its triangle formation which I drew in green. More importantly, the major uptrend line (red line) has also been penetrated today.

From a technical standpoint, I would not want to be long this market but at the same time I am also hesitant to short oil here. The reason for not getting short is because commodities are in an uptrend and I feel shorting oil is risky. I prefer to trade oil with the overall trend of commodities. Having said that, I will not short oil here but I will say that USO does indeed look quite heavy at the moment.

Has Crude Oil Broken Its Uptrend?

Today crude oil was down a little over 4% closing below a 2 month rising trendline. The question that remains is whether or not the uptrend has been broken. If you look at a seasonal chart of crude oil (lower chart) you will quickly notice that the 4th most bullish month of the year for oil is the month of September. I'd be very cautious about shorting this market with the month of September beginning tomorrow.

Rather than use the trendline as a means of determining if the uptrend has been broken, I would prefer to use the last swing low as a critical point to watch. The last swing low was made 2 weeks ago at the 35 level. A move below that low will add weight to the bear point of view but until I see that happen, I will have to say the uptrend is still intact.

Oil Stocks Sell Off

Last Wednesday I pointed out the weakness in the oil stocks that I was seeing at that time. Basically what I was looking at was the fact that the S&P made a new high for the year but the oil stocks were unable to break high with the rest of the market. My interpretation of that divergence was bearish and suggested possible weakness for the oil stocks.

As you can see in the above chart, since last week the OSX (oil drillers) has been hit hard with heavy selling. The ETF for the drillers (OIH) is down again today leading the market lower. You can read my original post from last week by clicking here.

Crude Oil Declines

Ever since I exited my long crude oil position around June 15th, many of you have been asking me why I don't get back into this market. Well if you look at the above chart you will see why. The momentum is clearly down which tells me to stay on the sidelines until the momentum shifts back to the upside. If things change I will post my opinion on crude oil in future updates but for now I'm not touching this market. Here is the link to my post from June 15th.

Crude Oil - Upside Target For USO

Crude Oil is really beginning to accelerate to the upside here. As you know I've been mega bullish on oil and have been expressing this view just about every week since last February. I just wanted to post the upside Inverse Head And Shoulders target for USO in the above chart.

Last week I scaled out of half my long position at the 200 day moving average and I continue to hold the remaining position looking for that upside target of $42 to $43 for USO. We'll see if the rally continues.

Crude Oil Tests Its 200 Day Moving Average

Crude oil had a wild day today starting the day lower but then reversing nicely to the upside along with the stock market. As you know I've been bullish on Crude oil since the lows and was looking for a seasonal rally which should last until the end of May. Well here we are at the 200 day moving average and the month of May is almost over. I'm scaling out of some longs here and placing a trailing stop right below the last swing low that was made on May 18th. For those of you who are curious as to why I was bullish back in late February and what the seasonal looks like, you can see all of that by clicking here.

Crude Oil - Upside Target

Crude oil has been advancing nicely over the past few weeks so I would like to discuss where I'm looking to exit this long trade assuming the rally continues.

Even though I am trading the ETF for crude oil (USO) it is still important to look at the futures market for chart patterns. Above is a daily continuation futures chart of crude oil with about 7 months worth of price data. So far we have seen two rallies take place since the low which was made in late December. The first rally (points A to B) advanced 38%. In February the next rally began (points C to D) and it advanced 48%. If we add 38% and 48% to the low at point E, we get an upside target zone of $64 to $69 a barrel. I think this would be a logical area to exit longs if oil were to trade in this price zone.

For those of you who are curious as to why I've been bullish on oil, you can read my original post "Has Crude Oil Bottomed" and a more recent post which was made on April 30th entitled "Potential Trade".

Energy Charts Of Interest

The ETF for Natural Gas (UNG) rallied up over 5% today on record volume. Has this market finally put in a bottom?




Gasoline made a new high for the year today. Looks like the seasonal demand for gasoline is beginning to kick in.



The ETF for coal (symbol KOL) has broken out of a 6 month trading range on very good volume.

Crude Oil Closes Above $50 A Barrel

Crude Oil surged higher today closing above $50 a barrel. The May contract settled at 52.64 up $4.25. USO (ETF for Crude Oil) closed up over 8%.

As you can see in the above chart, we have a series of higher highs and lows which can mean only one thing, the trend is up. Until this pattern is broken, we have to assume that oil prices will continue to trend higher.

Crude Oil Drops

The ETF for oil (USO) fell 6.67% today which is very close to everyone's favorite and lucky number of 6.66%. Gotta love those three sixes especially when you are long this market!

As you can see in the above chart oil has had a nice move up since February so it's only natural and healthy to expect some kind of a pullback. USO has now pulled back to the .382 retracemet level which is one third of the February/March advance.

Oil continues to make higher highs and higher lows over the past 6 weeks. Will this low that has yet to be established also be a higher low? Nobody knows for sure but if the seasonal trend for oil continues moving higher, I would be looking for the current sell off to terminate somewhere between the .382 and .618 retracement levels.
A move below the March 11th low (last confirmed low) will turn the trend for oil back down.

Have Commodities Bottomed?

There seems to be a changing of the guard taking place in the commodities market. Above is a monthly chart of DBC which is the ETF for the Commodities Index (CRB). As you can see there appears to be forming a monthly bullish engulfment pattern. There are still 5 trading days left in this month so the pattern is not confirmed until the month comes to a close. The reason I'm posting this now is because I'd like to share with my readers what I am seeing as it's happening.

Bullish and bearish engulfment patterns are one of my favorite candlestick formations when used correctly and can be a great help in identifying changes of trend within 1 or 2 bars of the actual high or low. For example, in July of 2008 DBC formed a bearish engulfment and that was literally the high of the bull market.
Now we are seeing a bullish engulfment forming which leads me to believe that commodities are going to rally.

Usually the first commodity to rally at major turning points is gold and that is exactly what's been happening over the past few months. Now oil is beginning to make a move higher and so is copper.

Like I said, there are still 5 trading day left in this month but the odds of a monthly bullish engulfment pattern forming are pretty high. If my analysis is correct, I think we should be looking to buy the dips in commodities that are showing the most strength. Lets see what happens.

Gasoline Breaks Out

Oil was up again today with crude oil making a new high for the year. Above is the ETF for gasoline (UGA) and as you can see this ETF made a 16 week high on very good volume. I think gasoline will lead the oil complex higher.

Oil Closes Above Its 50 Day Average

Oil was up again today with USO closing above its 50 day moving average for the first time since this bear market began. If you look carefully at the last few weeks you'll notice a series of higher highs and higher lows beginning to develop. I think the technical picture is showing clear signs that the seasonal rally is beginning to take place. We'll see what happens.

Oil's Reaction To The Opec Meeting

At yesterday's OPEC meeting it was decided not to cut output levels which caused crude oil to drop over 2 dollars last night. This morning oil opened lower trading as low as $43.62 for the April contract but managed to close the day higher at $47.35 up $1.10 from Friday's close.

I consider oil's move today to be bullish based on the way it rallied in the face of OPEC's decision not to cut production. If you look at the above chart of USO, you'll notice since the low was made on February 18th that all of the up days have been accompanied by heavy volume. The down days are being made on much lighter volume which in my opinion is another bullish sign that this market wants to go higher.

You'll also notice that USO is once again testing its 50 day moving average. This moving average has contained all rallies since oil topped out last summer. I think if oil can close above it's 50 day average, that will be a very encouraging sign that a bottom has been made and that crude oil wants to move higher.

Crude Oil Update

Crude oil sold off today based on a government report showing a larger than expected inventory gain and a drop in fuel consumption hitting a two-month low. USO (crude ETF) was down $1.53 closing at 26.30.

Looking at the above chart you can see that USO has reached the 50% retracement level of the last move up. I'm still bullish on crude oil as this is usually the time of year where the seasonal rally begins. A move down below the low from last month would negate my bullish outlook.

Crude Oil Update

As many of you know, I am bullish on crude oil and believe that this market has bottomed. As I stated in the past it's very risky and dangerous trying to pick tops and bottoms but when I see an overwhelming amount of indicators suggesting that we may see a rally, I have no problem making a trade providing my risk is low and the reward is high.

In the above daily chart of crude oil and gasoline, you'll notice that on the last move down 2 weeks ago, gasoline did not break low with crude oil. This is a bullish divergence and in my opinion bullish for the oil market.

If you would like to read some of my other reasons for being bullish on this market, you can read my post from February 27th by clicking here.

Crude Oil Continues To Move Lower

Crude Oil continues to move lower even after a record production cut from OPEC a few days ago. Notice the huge volume coming into USO which is the ETF for crude oil. You've just got to love these low oil and gas prices!