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Matthew Bradbard

Matthew Bradbard

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…

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Follow up to Crude oil...What’s his Next Energy Idea?

On 6/18 with Crude oil futures within 1.25% of $100/barrel I made a bold prediction that Crude would not cross $100 this time and instead it would retreat $3-5 in the coming weeks. An interim high was made in August futures the very next day at $99.21 and as of this post futures are nearly 6% off those levels. We are finding mild support at the 50% Fibonacci level at $92.75. In my opinion we may see modest selling in the coming sessions but the easy money has been made on bearish positioning and I think profits should be taken on the trade.

I will likely have bullish recommendations in Crude in the coming sessions…stay tuned. Outside of Crude on my radar in the energy sector is natural gas and the August crack spreads; long RBOB/short heating oil. Let’s touch on those below…

Crude oil:

Crude Oil
Click to enlarge.

Natural gas:

Natural Gas
Click to enlarge.

Since putting in a top on 5/1 August natural gas is lower by 16% completing 61.8% Fibonacci retracement. It appears we are finding some buying interest just above the $3.70 level. It will take a trade back above the 8 (orange line) and 18 (dark blue line) day MAs to confirm an interim bottom so are speculating until that happens. As long as we remain above support just under $3.70 bullish trades can be probed in my opinion. My suggestion is either outright long futures in August with stops below support (green line) or gaining long exposure in September and selling calls 1:1 against your futures. Upside objective in August comes in at the 50 day MA (green line) currently at $4.10.

August RBOB/heating oil:

RBOB/Heating Oil
Click to enlarge.
  
This is not for the faint of heart as you routinely see $1,500-2,500 of movement on this spread in 24-36 hours. The trade recommendation is buying August RBOB and selling August heating oil. Both contracts are 42, 000 gallon contracts which mean every 1 cent move in the spread is a gain/loss of $420. For the last five months when RBOB traded at 12-13 cent discount to heating oil this spread found support (see bottom red line.). Past performance is not indicative of future results. I am targeting 5-7 cents on this spread (top red line).

By. Matthew Bradbard

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. 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 than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.




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