Oil Reaching a Major Inflection Point

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.

The Chart

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)

 

 

 

Tags: $CL_F $USO $UCO $SCO $OIL $BNO

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.

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