Thomas
DeChastelain
Memorial Archives

Crude Oil Bull Remains Intact
posted Apr 22, 2006 at 04:15PM

Crude Oil Daily



Crude Oil Weekly




CRUDE OIL COT DATA (clik to see chart)

Discussion

Same old, same old. Another case of bullish price action accompanied by overbought technical conditions.

You really can't ask for better price action. A long consolidation pattern is broken by a break-away gap over trend-line resistance and zooms on to new secular highs.

And as Adam Hamilton has pointed out this enthusiasm for oil came with out the backdrop of an "obvious" new state of elevated crisis.

So where to from here? These kind of break-away gaps are the way Wave III's often get started. On the other hand the buying "frenzy" has reached levels associated with trading tops, and things are overbought on the daily chart. Depending on which indicator you look at, there is still room on the weekly for more upside.

The COT data shows that the commericials really laid on the short positions, but of course I of all people know that COT is not the end all and be all. Oil does have a tendency to lag gold, and when gold was in this position, the dips were fleeting indeed, and the price continued to rise inexorably, which what you expect to see in "Wave III/Phase II" market moves.

Still from a purely technical perspective you would think there would be some backing and filling here. Actually the price pattern for oil is "healthy", in that you have a clear break-out of a consolidation pattern. In a lot of other "things", the price patterns are taking on parabolic signatures, which does not make that happy at all.

You just have to remember what happend to silver to understand that. If it weren't for the Comex's own rules for trading limits, a lot of johnny come latelies would have had their lunch really handed to them.

Now as far as "core" holdings go I aim to stick with my junior oil sands. But then I have been in these things for a while, so I am only really risking paper profits. Sitting on paper profits which are decreasing is not necessarily "fun", but it is still a lot better than paper "losses", which is saying your original capital is now in a high risk position.

As far as "trading" goes I have been selling smaller trading positions as opportunities arise. That is just money management, risk mitigation, and an appeasement to my swing trader's nature. I just want to have some cash on hand in case the commodity sectors takes a breather.

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