The Oil Tirade ContinuesBrian Kahn - Wednesday, September 19th, 2012
At least you can say there is volatility in certain sectors. Really? Did I just use the word volatility? Yes, I did. A 10% move in a stock in 4 days is definitely volatile. The option 146% in the option.
Before I get to that, let's talk fundamentals. OK, that was fun. And now back to technicals.
Technically, to review this trade, please read yesterday's post. All you have to do is put together some fundamentals and some overbought technicals and Voila! you have a trading opportunity. Did I expect oil to go from 100 to 91, nope. If I did, I would still be in the trade. 58% is still not bad in 3 days and the reason I exited is because I am bullish to neutral the equity markets. Going short these markets and seeing a 58% profit is not too bad. Staying short in these markets has been a deathwish and profits are profits.
Now that USO has dropped to 34, what do we do? Today's clients did a great job of looking for the next support level - 32.50 based on price action. There may be a bit of support higher up based on moving averages, fibonacci's and the "oversold bounce" before we get to 32.50.
And if we do get to 32.50, I may just be a buyer at that point - all depends on what is going on when we get there, but my alerts are going in!
If you are thinking of buying puts now, go ahead and build your risk to reward using charts and ask yourself if they line up. Are you going to guess at a stop price or are you going to use a technical level. 100.00 was a technical level and it made sense in a weakening fundamental environment. I am not so sure about 34 being a great location to buy puts.
Remember, it is about overbought and oversold. Is USO overbought at 34? Has the train left the station and possibly already arrived at the next? Who knows?
And oh yeah, I am mildly bullish to neutral over the next month (for what its worth because I can change my mind tomorrow)
Happy Trading and Be Environmentally Cool
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.
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Educational purposes only - no buy, hold or sell recommendations.
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