OIL Here Again


THE TECHNICALS - Earlier in the month, I talked about a possible buy opportunity in OIL and waited for the opportunity to set up. The trade finally came my way and I took a shot on the long side. The trade gave us initial follow through, before stalling out and forcing me to take a small profit on the pullback. Days later, that same OIL trade has come back to me and at even more attractive levels. Technically speaking, the RSI is back to deep extended on the daily chart, begging for some form of consolidation at a minimum before even considering a meaningful bearish continuation. This also follows a dramatic price decline in a deeply liquid market, where the commodity has collapsed some 35% off the October high, just weeks back, after looking like it was about to break out to the topside, reaching it's highest levels since 2014. This is not what you would expect from such a market and the fickle price action has me expecting some more jerky price action that will open a move back the other way. So happy to be in again.

cartoon nov 21

MORE TECHNICALS - Another big motivation behind the trade is the fact that this latest collapse in recent sessions had come in very thin holiday trade in the latter portion of last week. I tend to ignore price action in thinly traded sessions like those and find that a market will often retrace back to levels where it was trading pre-holiday before making any new decisions. This would take the commodity back to the $55 area, which is a nice bit higher from the entry point of the trade. I've given the trade plenty of room to breathe, as I always do, all while keeping the maximum total risk below 3% of equity. Another interesting thing about where the latest setbacks have extended to, is that the market has retraced 78.6% of the move from the 2017-2018 low to high move and just over the 50% retrace off the massive 2016-2018 low to high move. The market traded through the 50% in that thinner holiday trade, which again, has me liking the level down here around $50, which also happens to be a very solid psychological area of support.

Lots of technical reasons to at least be considering another long position in the price of OIL.


Friday Position Review

Looking at the current exposure as we head into the weekend.

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