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.
Click to enlarge.
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
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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