Daily Crude Oil – An Interim Top?

Crude oil has gained $8/barrel in the last month, putting it just a few dollars shy of $100. My stance: the easy money has already been made in bullish trade.

Prices moved quickly from oversold to overbought territory as Stochastics shows in the chart below. I think we're in the process of establishing an interim top, with a $3 to $5 correction soon to follow.

Click to enlarge.

As far as winning streaks go, crude has closed higher 14 of the last 20 trading days (after a swing low on March 4th). What's more, we haven't seen two consecutive "red" sessions since that low was established a month ago. This streak will be broken if today's close is below $97.  In my eyes, we'll have confirmation of an interim top on a settlement under the 8-day MA (orange line). I do not see a fresh 2013 low on the horizon, but I do think the market can depreciate $3 to$5, giving us plenty of room for a bearish trade.

If you're bearish WTI, my suggested play is shorting June or July futures while simultaneously selling out-of-the-money puts 1:1. Use Fibonacci levels as your objectives - a 50% retracement would drag May futures $3.50 below current trade… June and July contracts should move accordingly.

As always, I'm here to discuss specifics and give guidance. Give me a call…

To discuss in more detail this chart or any other you can reach me at: mbradbard@rcmam.com or 954-929-9997

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