After a near $10 run higher in the last month February Crude oil futures have stalled just under $94/barrel. I think aggressive traders can probe shorts looking for prices to trade a back under $90/barrel in the coming weeks. Traders would get confirmation on a settlement under the 8 day MA; identified by the orange line in the chart above just under $92.50.
As traders we all know that past performance is not indicative of future results but Crude futures did fail from around these same levels in the Fall before bottoming out mid winter, consolidating and appreciating in recent weeks as one can see…will history repeat itself? I am in the camp that we are in a trading range in Crude for the next several months and I will be looking to sell near the upper end of the range and buy near the lower end; $86-94/barrel. My preferred way to play Crude in this environment is to place a futures trade with my directional bias and then implement an options strategy as a hedge to manage the trade, for instance be short futures and sell puts 1:1 is my current advice.
In regard to speculators being leery of bearish exposure because the unrest in the Middle East…as long as I can remember there has been a situation that has built in a risk premium so unless there are new developments in the immediate future my stance is Crude has largely shrugged this off. For whatever reason if we see prices get above $95 I will likely cut losses with clients in futures and hopefully the sale of puts will soften the hit a little.
By. Matthew Bradbard
To discuss in more detail this chart or any other you can reach me at: mbradbard@rcmam.com or 954-929-9997
Risk Disclaimer: The opinions contained herein are for general information only and are not intended to provide specific investment advice or recommendations and are not tailored to any specific's investor's needs or investment goals. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions ("Forex") before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.
I have over 1 decade of experience in the Commodities industry. Managing my own IB for over 5 years and my own CTA for fifteen… More