Friday, 25 December 2015

Is it time to get long crude oil?

Crude has crashed and most feel the current lower prices is a good time time get long crude, but is it?
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Crude oil will not stay at low prices. OPEC nations will realize that over suppling the market to keep prices down to hurt Russia is not working. For the simple reason Russia's friend China has accepted more imports, to the detriment of Saudi Arabia. Oops!

However there are still dozens of oil tankers going around in circles in the ocean who have yet to give up the long trade and have yet to sell there oil back into a depressed market, further depressing prices.

Fundamentals are one thing, market technical readings are another.

We are Richard Wyckoff fans, so will be waiting for Wyckoff accumulation logic to prove that prices are ready to go back up, or at least stop falling.

Below are two technical readings to watch for, to show that things maybe improving for the bulls.

1) On a down swing volume is relatively less, than previous down swings. This means those that have purchased at depressed levels have no intention of selling their accumulated positions while prices are still falling, a very bullish sign. They know higher prices are near.

2) On a down swing implied volatility is relatively less, that the previous down swing. This means the heat is gone out of the battle to acquire options, and BID and ASK spreads find some sort of normal spread. This means there is less fear present. A down swing with less fear of lower prices by the market players is very bullish because they know that higher prices are very near (These ETF have no earnings dates).

In the charts below volume or implied volatility have not slumped during the latest down swing, therefore there is no evidence the depressed price period is over. Therefore thinking of getting long is only for those with deep pockets and no trade margin.

Charts below

USD ETF


USO



DBO ETF


DBO



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