It appears to me that Oil is setting up to donkey punch the oil bears and market bulls alike.
Oil, via [[USO]] looks like nothing more than a great breakout with an orderly pullback to a trendline and moving average support.
If you are short oil here, or betting on a stronger general market due to relief in oil prices, be very careful over the near term until we see if the technicals breakdown.
If you have been considering an investment in oil or its related services, this may be a good entry point to start a small position.
I tend to agree – after some climactic action in most of the oil stocks a few weeks ago and with the low-float momo names blasting off, I was expecting a much more sharp and severe pullback and was calling for at least a medium-term top. There have been a few oils that have broken down in earnest (EGY and SGY are two examples from today) but overall I can’t say this pullback in most oils has been anything but orderly. Volume has been high on some, but that is to be expected. Perhaps since crude is almost oversold, another move higher in these stocks will be the last straw that finally cracks this market open to the downside after fighting it for the past two weeks.
Mac, I think that is plausible. Let oil move back up, suck in more players, stocks test the previous highs, and then fail.
That’s certainly a possibility that I didn’t think about – I was talking about the overall market though. None of the major indexes have made much headway this week even with crude trading down almost every day. What happens when/if crude heads back towards its highs? The overall market still seems to be biding time to me, but it may take a catalyst to push it over the edge.
Good chart Woody, thanks.
Wood, I also posted this to RC, I have a pick that I would appreciate your thoughts on. NCEN is an ob wind energy play. If you pull up a 6 month chart (I would put on this on here if I could) you have a beautiful trendline looking to hit the pullback trendline and some support all in the 3.6-3.8 level. I think that this one has some momo to go higher from there and I am hoping to see this play out in the next week or two. I would appreciate your thoughts. Thanks, Danny.
I got donkey kiked.