For the last 3 weeks Crude oil has been range bound trading in a $3 range which for this commodity is flat. Futures continue to wander on both sides of their 8 and 18 day MAs. These two levels serve as pivot points as I am slightly bullish above these pivot points and slightly bearish under these levels. In recent weeks I have advised clients to be short futures while simultaneously selling out of the money puts 1:1 in May and June contracts.
My stance remains that we get a risk off trade that drags metals and energies lower. Metals have already started to break lower with gold off 6.3% in the last 2 ½ months, silver lower by 4.6% in the last 3 weeks while energies continue to push higher. Look for relationships and correlations for guidance…if and when a trade higher in the dollar resumes or if we ever get a break in stock indices I think the outside market influence could help push energies lower. I am not looking for a bear market but just a trade. I think futures could trade back to $92/93 barrel.
The recent uptick was on the dollar backing off which was an overreaction to the G-7 in my opinion. Also news that OPEC may be lifting global demand but that to me has been factored in and why Crude oil is near $100 and not in the mid 80’s. If we make a new high those that are not hedged off with options would be advised to take their loss.
By. Matthew Bradbard
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