A Crude Oil Story

choobeebo is the nick of a commodity trader I met in the Finance Manila forum who expresses his views regularly on commodity markets as well as technical analysis. He was kind enough to email me his ongoing views on crude oil as the prices fluctuated this month and I’m posting those views here as a sort of virtual journal of a commodity trader both as an illustration of how a trader can react to dynamic and changing conditions alongside the use of their preferred strategies: in this case technical analysis.

So choobeebo, take the floor:

 July 7th Closing Comment: The blue uptrend line is intact. As long as prices stay above this line, technical traders would buy minor corrective breaks or declines into support areas – - which in the current case is in the $137-139 zone. To trade the bull channel, buy when the price nears the blue diagonal uptrend line and sell when the price nears the yellow diagonal line. Cut loss or get out of long positions if the market trade below the blue diagonal line as this indicates a deeper price decline is likely.

July 17th Closing Comment: In our previous technical commentary ten days ago, I advised cutting loss or getting out of long positions if the market trades below the blue diagonal line (“the uptrend line” in technical market analysis parlance) as this event indicates a deeper price decline. This is exactly what happened. The market is now about $8 below the uptrend line. Bulls need a quick market snap back to above $132 in order to maintain a sideways tone and to minimize the bearish implications of the uptrend line violation. A failure to do so in the next two sessions would confirm the market breakdown. Technical measurements point to the $118-122 zone as 1st bear target if the technical breakdown is confirmed.

July 25th Closing Comment: The bears continued to press the downside after breaking the market below the uptrend line. We are now very close to the 1st bear target. In our previous commentary we mentioned that technical measurements point to the $118-122 zone as 1st bear target. Further declines could not be ruled out. Other than the technically oversold condition of the market, there is no hint of a bullish reversal yet. After having reached the 1st bear target, a corrective bounce to $132 could not be ruled out either. The market is likely to go into a consolidation mode (sideways trading) after sustaining those sharp losses. I would like the market to post a higher low before confidently taking the bull side.

Many thanks for the blow by blow analysis choobeebo. As markets change, so does our anticipation, in what can only be described as a never ending dance.

Others prefer solid convictions that never change despite already clashing with reality. Those are the people who get their head handed to them when the markets swing wild.