It's a time to sow seeds in the oil market here with a long term view in mind. Short term the market looks terrible with no bottom in sight. Long term we are down to the bottom end of the range with only $30 until you get oil for free.
The risk/reward is very interesting here since the last 2 years range is over $100 to the current $30. If the price of oil falls to $20, it will be a big win for all of us too from lower transportation costs and lower heating costs. But it oil turns and goes up from here it could be a big negative. It will make sense to lock in these low prices for as long as possible, perhaps the next 10 years.
What is the best way to achieve this "hedge"? That remains to be the item to discuss. It could be looking around for "oil in the ground" through the various companies that own vast reserves of oil that can be pumped up when prices rise. You can research for yourself and find companies with reasonable debt levels, solid cash flow, low production costs and lower dividend payouts.
Either way, I like the odds here that oil can go up $70-$100 in the next 5 years, but I don't see it going down more than $10 for a risk/reward ratio of 7:1 - 10:1. Those kind of upside/downside rewards are rarely offered in the markets.
On a SHORT TERM basis: Look at the various technical setups. 1. There is a lower volume drop on this recent push down, implying weaker sellers. (see Volume chart below) 2. Short term price oscillators are turning back up (See CCI xo -100). It's a measure of price relative to the 11-day average. 3. Longer term price oscillators are failing to keep downside momentum. See the bottom window where the 1 year rate of change has been making higher lows with each push down, which is a bullish "standard divergence". 4. My proprietary "RgMov" price trend indicator is showing that the new lows were not confirmed.
Keep in mind that this is a continuous contract and is NOT a real contract. To achieve this price return, you would have to roll from one contract to the next and it could either cost you a lot of money or it could hand you free money. Owning crude oil above the ground is an expensive proposition.
Keep me appraised of your "BEST WAY" to own crude oil. I'll do my best to reply or respond to your questions or comments.
BUY CRUDE OIL 31.01 LAST, 20 stop, 100 target - long term (1 year - 5 years) BUY CRUDE OIL 31.01 LAST, 45 target, 20 stop - medium term (6-12 months)
Tim 1/14/2016 Thursday 11:42AM EST
評論
IvanLabrie
⋅
Target #1 hit. :)
HermanBrummer
⋅
Well played, awesome entry I must say. That risk to reward ratio makes perfect sense.
timwest
⋅
Thanks HermanBrummer!
elliott-wave-analysis
⋅
timwest
⋅
I am not relying on Elliott Wave counts to justify the trade here. It might take a month or more for this trade to set up. It could also happen overnight with any embargoes, attacks, or detonations. I hope you can post when you take a trade using your line of thinking. I am a schooled expert in EW from the genius of Glenn Neely of NEoWave. neowave.com Feel free to check out his materials. Nothing is more in-depth then Glenn's book on EW.
SynergyCharts
⋅
Tim I totally agree with your view.....it just might dip below $20 before the turn. First the 26.00-23.80 , but lower "Magnet Targets" might come as we know markets go lower or higher than anyone expects.
SynergyCharts
⋅
Vladimir2016
⋅
Perhaps even better do not use a stop for this long term positions. At the same time calculate the size of position of the possible levels of 20 and 12.
Profits will only depend on time)
lucianfx00
⋅
Low leverage with no stop probably the best way to trade this, the only thing that bothers me is the swap wich is verry high. I would instead like to short USDCAD for 1.34-1.30 (has positive swap for shorts, ) but there is less gain there if oil bounces and also if it goes to 25 or lower this USDCAD can verry verry fast reach 1.6 or higher
Vladimir2016
⋅
It certainly makes sense, but I suppose the potential profit growth for the position(oil) will be much more than the losses on the swap or rollover. The correlation of USD / CAD with oil is only 0.6-0.8.