Oil Reaching a Major Inflection Point
- Posted by TheArmoTrader
- on May 22nd, 2012
Oil has sold off pretty dramatically over the past month. While I did not expect oil (or gas) prices to stay over the $100 mark for an extended period, I did not expect the sell-off to the low 90s this quick. I thought we would have just seen a slow grind down for the rest of the first half of the year. However, with global growth slowing, those deflationary pressures were too much on WTI Crude Oil ($CL_F, $USO), along with the ever-increasing production of it as well.
Oil however is reaching a major inflection point that could decide where the next 10 points would come from. Will we see a similar sell-off like last year when oil dropped to $75 and change or will we see a bounce here as growth picks up? Whatever happens, $90 will be THE level to watch. If we hold it here, we could see a nice bounce back to the high 90s. If this drops, we could see a quick sell-off to the mid 80s. Personally, I don’t see a similar melt-down like last year, so I would be playing it on the long side (using ETFs like $UCO or $USO) with a stop below 88.50 ish. Risk about 1.5-2 points for a possible 7+ point move, I’ll take that risk/reward trade any day.
Light, Sweet Crude Oil Futures – ($CL_F)
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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