Keeping the Momentum with Oil
Sep 25th, 09
The time may be now, for oil investors who have long been waiting for the price of oil to return to the peak years. Analysis of crude prices, from the beginning of 2009, slumping around the low $30s, to current, reflects we may be at the hurdle towards oil share opportunities at values near $90…
Whither Goes the Price of Oil?
The price action in the oil pit intrigues us at the moment, as it has rallied up from its January and February lows of around $30 to its current recovery high of $74 set in June and August ($26 in terms of the Oil ETF).
Now what? We have enclosed three charts below to help give us any clues on oil's future direction between now and the end of the year. These are the iPath S&P Crude Oil Total Return Index ETF (OIL), the crude oil sweet with Gann analysis, and the energy sector versus the S&P 500 with oil sentiment.
The top chart of OIL's share price action shows that the price has recovered since the July lows on falling volume and is consolidating under its June highs of $26. In the second chart we can see oil is at a critical level in both time and price. It needs to break upwards before the end of September to avoid breaking its upward trend line since February. If this occurs a rapid rise to $90 could occur.
Sentiment in the oil patch has yet to reach overly optimistic levels that normally mark an important top, and the sector's relative strength against the S&P 500 is showing some signs of life at support of the October lows of last year.
On balance we are negative on oil over the next twelve months and do not expect OIL to break through its old June highs of $26. However, we fully admit that a break upwards (on high volume) before the end of September may trigger a sharp move towards $90 and this will probably produce opportunities for oil shares and, given their large index weightings, lift markets to further post recovery highs.
Source: BigCharts.com
Source: IDS
Source: Ned Davis Research
Disclosure: No positions.
Article Source:
"Whither goes the price of oi?" September 17th, 2009. http://seekingalpha.com/article/161967-whither-goes-the-price-of-oil