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.
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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。