I am short oil. I did this simply because the chart dictated that message via multiple indicators, as follow…
First, prior to the recent collapse just weeks ago, crude oil was trading in a range of $55 as a high, down to $52 lows. After oil collapsed to $46, we have seen a technical bounce that touched the $52 today. This is major resistance because it is the former low end of the range.
The next factor is found on the USO, the ETF that tracks oil. Today it tagged the daily 200 moving average after a massive bounce run. In addition, the daily 50 moving average sits just pennies above. This signals a pull back, thus another signal to short.
Lastly, oil inventories continue to build. The U.S. is producing more and more oil, killing any price pressure from OPEC’s production cuts. Oil above $50 will only increase U.S production. I expect another leg lower on oil in the coming weeks to $40.00. I am short and enjoying the small risk to big reward.
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