SLB (Short) - Betting on demand destruction in oil markets
The Overall Market
The current market is extremely tricky, but it is possible to find a rational explanation for every move. I took a closer look at the oil market, which is clearly undergoing gradual demand destruction caused by the recession fears (like the recent economic news from China) Although I understand that the bigger-picture supply situation might lead to higher commodity prices in the future, demand destruction is likely to prevail in the next 3-6 months. My target range for oil is 60-70$. The broader markets are also due for a correction after that massive run, which would give more momentum to my trade.
Fundamentals
With this view in mind, I started looking for a way to express this idea. I choose to be a little riskier, so I wanted to express the trade through a single stock short (but there are obviously many more ways to express this trade if you want to take less or more risk). Hence, I started looking for energy stocks which perform the worst on a relative scale. I arrived at SLB; a large-cap company (50b), so don't expect too much volatility. Although the firm's fundamentals are pretty solid, its share price is not able to diverge from its strong correlation with the oil price.
Technicals
From a technical point of view, the stock gets 10/10. We saw a massive slump during June, which indicated the end of the prior trend. Since then, the stock has consolidated and returned to a very strong line of support/resistance (black line). I would suggest setting stop loss just above this line, on top of the previous high (red line). This gives a perfect risk/reward (R/R) ratio where you risk only 4%. The stock is also being approached from above by its 50 and 200 SMA. MACD is showing a bearish divergence while just turning at the 0 line. Daily RSI also nicely bounced around the 60 level and seems ready to head back to the bearish territory. If you switch to a weekly chart, you will see that the weekly RSI just broke down and looks like heading lower. I indicated two profit targets (green lines). One would give you R/R of 4:1, the other around 6:1.
Happy trading.
The current market is extremely tricky, but it is possible to find a rational explanation for every move. I took a closer look at the oil market, which is clearly undergoing gradual demand destruction caused by the recession fears (like the recent economic news from China) Although I understand that the bigger-picture supply situation might lead to higher commodity prices in the future, demand destruction is likely to prevail in the next 3-6 months. My target range for oil is 60-70$. The broader markets are also due for a correction after that massive run, which would give more momentum to my trade.
Fundamentals
With this view in mind, I started looking for a way to express this idea. I choose to be a little riskier, so I wanted to express the trade through a single stock short (but there are obviously many more ways to express this trade if you want to take less or more risk). Hence, I started looking for energy stocks which perform the worst on a relative scale. I arrived at SLB; a large-cap company (50b), so don't expect too much volatility. Although the firm's fundamentals are pretty solid, its share price is not able to diverge from its strong correlation with the oil price.
Technicals
From a technical point of view, the stock gets 10/10. We saw a massive slump during June, which indicated the end of the prior trend. Since then, the stock has consolidated and returned to a very strong line of support/resistance (black line). I would suggest setting stop loss just above this line, on top of the previous high (red line). This gives a perfect risk/reward (R/R) ratio where you risk only 4%. The stock is also being approached from above by its 50 and 200 SMA. MACD is showing a bearish divergence while just turning at the 0 line. Daily RSI also nicely bounced around the 60 level and seems ready to head back to the bearish territory. If you switch to a weekly chart, you will see that the weekly RSI just broke down and looks like heading lower. I indicated two profit targets (green lines). One would give you R/R of 4:1, the other around 6:1.
Happy trading.
免責聲明
這些資訊和出版物並不意味著也不構成TradingView提供或認可的金融、投資、交易或其他類型的意見或建議。請在使用條款閱讀更多資訊。