Feb 13, 2010
"Security is the chief enemy of mortals." - William Shakespeare, 1564-1616, British Poet, Playwright, Actor
Oil recently mounted a strong short term rally and traded as high as 77 but pulled back just as fast. This inability to hold above 74 suggests that it is still in a consolidative/corrective phase; unless it trades above 74 on a weekly basis the odds favour a pull back to the 63-66 ranges.
The intermediate pattern is still bullish and suggests that by summer oil could be trading significantly higher. The first sign of much higher prices to come will be for oil to trade past 78 for 3 days in a row or close above 84 on a weekly basis. Thus going into the summer season we could be looking at higher prices and a depressed stock market.
As long as oil remains below 74, the trend will remain negative. Currently, we have weekly and daily sell signals in effect. The daily signal is moving closer to the buy zone and a new buy signal should lead to a rapid upward move in a relatively short period of time; if this occurs we will definitely issue a long trade in our VIP futures service. However, as of yet we have no buy, so do not jump into this market, unless you are opening up long term positions. A weekly buy signal would be a very good early indication that oil is getting ready to trade well past the 93-95 ranges and possibly past 100.00
Finally oil has been trading in a channel formation that ranges from 66 to 84 for almost 8 months; the longer the channel the more explosive the move. The only problem is that channel formations do not give clues as to which direction the move is going to occur. For that we need to use other tools and that's where multi time frame analysis, daily and weekly signals, etc., come into play. Preliminary indications suggest that the next big move is going to occur towards the upside. A daily buy signal would give an early warning of this break out, while weekly buy would indicate that the breakout is gathering steam and that oil is getting ready to challenge the 90 plus ranges.
From a long term perspective any price below 65 is great play to open up new positions in oil related stocks.