I think crude oil has plenty of room run. It’s an opinion based on the charts. I’ve drawn some lines of resistance on a daily chart of crude futures. Even though I think crude can move all the way up to re-test the $111/$112 price level I want to see how crude behaves at resistance. If we consolidate at these levels, like we are right now, then I’m bullish and believe higher prices are in the cards. If we hit the levels and revert lower on higher volume then the move up to prior highs becomes difficult to achieve.
I pay attention to how stocks and commodities behave at certain levels because it helps me decide how I’m going to handle a trade. If we utilized USO, the crude ETF, to invest in crude I would want to know before getting into the trade what would get me out – or at least harvest some profits or minimize loses. The levels drawn along the way help me manage the position or take off risk.
I typically use Delta 70 calls with a 45-60 day time frame when I’m trading USO. I’ve taken the liberty of drawing the levels that we’ve used on the crude chart and placed them on the USO chart. Now I can see what a move will look like on USO if we move up to $112 on crude.
What would shake me out of this position? A close below the 8-day exponential moving average would most likely consider the validity of this trade.
I hope today’s newsletter helped.
Best Regards,
Tim
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