Has oil finally bottomed, or is it just another oversold reaction, this time aided by the unrest in the Middle East?
I have always believed that for a good uptrend in a commodity, commodity companies should outperform the underlying commodities. I have talked about this in the context of gold and gold stocks, and we see that both are in an uptrend at this moment with gold stocks so far leading the yellow metal.
But what about the oilers?
The above performance chart shows us that some oil companies have been outperforming Oil.The energy ETF XLE has also been outperforming Oil. But XLE hosts Natural Gas companies and drillers as well as oil companies. Regardless, the energy area has been outperforming the price of the energy commodity (the same is true of Natural Gas as well)
Looking closely at some main oil companies, we see that the individual charts look somewhat corrective
Some future juicy short potentials in there. But, for now, they have been uptrending. Quite unlike this horror show of the oil-realted USO
A lot of divergences are being built, and are routinely ignored by market participants. But the oil stocks have been firming up and some are in uptrends.
So either oil stocks start to crash and join oil on their merry way down, or oil bounces off its divergences at some point to follow the oilers.
As things stand now, the future curve of oil contracts show quite a bit of contango. That indicates that, at this point, the future market expects higher prices in the future. Of course, the future market can be wrong, but I am willing to bet on the side of the future market and against those who are ignoring the positive divergences and the lead of oil stocks.
This is a 30 minute chart of USO, which I have been using to draw trade setups.
In three prior instances, the trade would stop with minimal loss or small profit, basically flat. One can make speculative bets and still get out with one’s skin intact. The key is position sizing, and trade discipline, so much more so when, like in this case, the bet is against the trend.
A lot of divergences are being built, and are routinely ignored by market participants. But the oil stocks have been firming up and some are in uptrends.So either oil stocks start to crash and join oil on their merry way down, or oil bounces off its divergences at some point to follow the oilers.
As things stand now, the future curve of oil contracts show quite a bit of contango. That indicates that, at this point, the future market expects higher prices in the future. Of course, the future market can be wrong, but I am willing to bet on the side of the future market and against those who are ignoring the positive divergences and the lead of oil stocks.
This is a 30 minute chart of USO, which I have been using to draw trade setups.
In three prior instances, the trade would stop with minimal loss or small profit, basically flat. One can make speculative bets and still get out with one’s skin intact. The key is position sizing, and trade discipline, so much more so when, like in this case, the bet is against the trend.
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