Crude Oil Update
Crude Oil is having some difficulty holding the $61.43 entry. We did see a close of $61.79 (higher than the $61.43) but because we had a red candle previous to this entry on February 27, we needed to see the confirmation from the buy side. After the $61.79 close we needed to see buy side volume of 471,970 and received 270,667. Again, we saw a close higher than the entry BUT the VOLUME DID NOT VALIDATE THE PRICE and as a result we have now seen two red candles in a row with the current price as I write this just below $61.00. This by no means represents a bearish signal at all but rather a respite from some buying as we meet overhead resistance. The price could very well stay higher than the stop loss before punching higher but again, rather than guess, allow the professional traders to interpret the data and move the price and volume to levels we would need to see to take a long trade here.
On the Natural Gas front, we have seen some selling. Currently we are right on top of the break of $7.27 with a target to the downside of $6.94 with volume needed of slightly over 42,000. Should this current close hold at or below $7.27, the volume already is there with 85,719 to the sell side.
There is a great deal of chatter out there still regarding Peak Oil and what it means to the long term view of Crude Oil Pricing. If you can stomach the volatility then simply take any long entry here and wait out any declines knowing full well that we will be roughly $40.00 higher this time next year than we currently are.
What has not changed is the pricing of energy companies. Despite the rapid move up off the bottom from $49.90 to a high of $62.49 or roughly a 25% move up, energy related stocks have not enjoyed the same increase in share value. In fact, many of the junior companies have continued their share price declines with the producers remaining flat or in a consolidating pattern. One would logically assume given the threat to supply, the peak oil phenomenon, and old man winter giving us one more ride on the sled before donning his trunks and heading off to warmer temps, that share prices would be on the move higher rather than lower or consolidating. All of this defies logic but to get a better idea of where share prices are heading, simply watch the professionals. They may not be right all the time but they are the tail that wags the dog.
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August 6th, 2020
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