Earlier this year Oil broke out of a long term, beautifully formed rising wedge. Since that break out crude rallied big then sold off hard and recently returned to the apex of that wedge where the 200 dma also lies. Oil seems to be at a major pivot here, any lower or sideways would mean that breakout had failed and a long term down trend would be in place. I think the more likely scenario would be a continuation of the long term trend upwards off support here. If the world really is going into recession though it would make some sense for oil to go into a bear market with stocks. Looking at the ag commodities, DBA seems to be breaking out of its recent multi-month downtrend and headed back to the upper end of the 2008 range, like it did in June. I'm looking for DBA to retest the highs as inflation picks up speed with falling interest rates world wide.
Disclosure: I own some DBA calls
6 comments:
It has been interesting listening to CNBC try and make fundamental sense of the recent moves in oil. They mostly seem dumbfounded. On the way down it was, wow this is really bearish that oil isn't bouncing on the Georgia news. Then yesterday it was, wow this is really bullish that oil isn't dropping despite the inventory build. Then today's its, oh, oh, oil is rising because we are starting a new cold war!!
If you just look at the chart is pretty clear what happened. Oil is in a long term uptrend. The move got exhausted to the upside and there was a failed breakout. From failed moves come fast moves and some people were too long of oil. It pulled back to a rising trend line, the 200 dma and support at $110 and now the uptrend resumes. Pretty straightforward if you view the market from a technical perspective.
The title of this post was "Do of Die," well oil DID.
Just to clarify, the failed breakout that I mentioned in my last comment was the smaller one (short term) at the very top on the daily:
http://stockgeometry.blogspot.com/2008/07/saturday-rock-blogging-it-must-have.html
I was not talking about the big one in oil chart that I posted above. If that breakout proves to be a failed one then it would indicate a long term reversal for oil. But that hasn't happened yet, a weekly close below $110 would confirm it for me.
Oil is going back up. Draw as many squiggly lines as you want. It was a shakeout like the rest of the commodities sector. Too bad they can't seem to keep physical Gold in stock during this "downtrend."
It will wait until everyone says "Oil is through" and then slam back on the gas pedal. Your classic government collusion whipsaw mediated by Goldman Sachs.
Anonymous, I agree 100%. I expect the "shakeout" which you are referring to will conclude with capitulation on the break of $110. Thats a very important price point psychologically as deemed from the chart. $110 breaks, volume surges, CNBC cries commodity bear market, the chart begins to look long term broken, its then that oil rallies like a bat out of hell to at least the recent highs. Thats my expectation. Crude at $108 might be the cheapest you'll ever get to buy it again.
And for the record, my lines are not squiggly, they are straight.
Evening guys,
As I sit around the pool having (more than) a few cold wobbly pops while listening to the old Wolfman Jack (XERF?) Show, I perused your comments on oil with great interest.
I've noticed that oil has almost been acting like a currency, as it has been responding to world events, that is until the Russian/Georgian conflict.
There are numerous interesting viewpoints on that conflict, and it's ties with oil: http://online.wsj.com/article/SB121944599188265089.html?mod=hpp_us_whats_news and somewhat eyebrow raising: http://my.opera.com/richardinbellingham/blog/2008/08/22/what-israel-lost-in-the-georgia-war-by-time-magazine .
Generally you can chart a stock, commodity, indices, even some currencies when things chug along as usual. However I think that with the election coming up, recession fears in USA, China & Europe (not to mention India etc.), we will see greater fluctuations, making any visible trend a much longer term trend.
So am I nodding and saying no, or shaking my head in agreement?
Or am I having another one of these potent Canadian beers and reading more...
Owwwwhhhhhhhh!
Get Nekkid!!!!!
And keep up the posts, we are all reading, and only jf hangs around the graveyards. (necrophilia can attack anyone)
Oil died.
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