Why I am a $65 bear in Crude Oil
- Posted by PeterLBrandt
- on June 23rd, 2013
The charts could be an accident waiting to happen
The monthly and weekly Crude Oil charts have been forming a 9-month triangle within a 3+ year triangle. This price behavior represents a tremendous amount of compression that will at some point be released.
Of great significance, in my opinion, was the upward price thrust in mid-June that completeed an inverted H&S and the smaller symmetrical triangle. This upward breakout has now proven to be a classic bull trap.
Targets are the lower boundary of the smaller triangle at 86.70, the lower boundary of the bigger triangle at 81.72, the target of the smaller triangle at 72.89 (assumed the completion of the smaller triangle) and the target of the larger triangle at 59.50 (let’s call it 65.00).
But, you might say, this kind of drop is impossible because producers must make money. Who says?? Markets in supply surplus (such as energy at the present time) tend to go the production price of the most efficient producers. Plus, which one of you macro economic fundamental experts predicted Crude could drop from $148 in mid 2008 to below $40 in just six months. Don’t you all raise your hands at once! So take your pet macro economic/fundamental scenario and burn it with the trash!
Disclaimers and caveats: I am short Crude Oil futures and will be stopped out if the market makes a new high. I am looking to add. Decisive closes below 85.90 and then below 77.25 are required to confirm a target of $65.
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
Peter Brandt entered the commodity trading business in 1976 with ContiCommodity Services, a division of Continental Grain Company. From his start in the commodity industry, Peter's goal was to trade proprietary funds. But, he first needed to learn the business. More »