Crude, Crude, Crude
This morning while scanning the Newsflashr Business Feeds section, I noticed that virtually every major news organization was reporting on Crude Oil prices breaching $130 per barrel for the first time. Most of the headlines were of this variety:
“Crude Surges Above $130 on Supply Concern” – Fox Business
“Oil Tops $130 for First Time” – BBC
“Oil passes $130 for the first time“- CNN
“Oil tops $130 Haunted by Future Supply Worry” – Reuters
“Oil rises above $130 for the first time” – USA Today
And my personal favorite…
“Oil Soars to $130, What Will Congress Do?” – ABC News
There are other headlines on the Newsflashr site, which allows you to view headlines at a glance from top news sources, then allows you to click to read the stories that interest you. It’s a whole new way of reading the news.
With all these stories, I thought it would be helpful to show you the recent charts in Crude Oil and make a few quick observations:
If you ever wanted a classical technical analysis definition of an uptrend (series of higher highs and higher lows) then this chart is it. While prices do not rise in a straight line, they do experience temporary consolidations or pullbacks in the upwards price drift, which actually creates trade set-ups and low-risk ideas.
The rising 20 or 50 period moving averages often halt any retracement in price, as does certain Fibonacci retracement values (38%, 50%, or 62%) which can create powerful trade set-ups when combined with another support zone.
Crude Oil indeed made yet another new price high which was confirmed by a new momentum high. We are seeing the higher prices that were forecast (as a probability) from that recent May 12th NMH. Barring some major fundamental (supply/demand) change, odds still favor continuation of the prevailing trend.
Let’s see how strong this trend is on the weekly chart:
Price has more than doubled since the beginning of 2007, with the momentum oscillator continuing to make new momentum highs right along side with price (suggesting further continuation).
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The price swing from $90 per barrel to $130 was a sustained advance with only two weeks during that time being negative.
If you count the weeks, in 2008, Crude has gained 14 weeks, declined 5 weeks, and ‘tied’ 1 week. Those are amazing statistics for any commodity or market! Unfortunately, higher prices in this market affect the broader economy, and higher crude cuts consumer and business cash flow, which reduces relative buying power across the board.
The contrarians exist, and with so much headline exposure, it would be hard not to be at least slightly contrarian, but fighting such a strong trend can be damaging to your account. Continue to check back and keep your eye on this market and what it could mean not only for the overall market, but for yourself or your business.