The Crude Oil Trader

Monday, December 28, 2009

Crude Oil Bulls Maintain The "Holiday Advantage"

Crude oil was higher overnight as it extends last week's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If February extends this rally, the reaction high crossing at 80.40 is the next upside target. Closes below the 10 day moving average crossing at 74.85 are needed to confirm that a short term top has been posted.

Monday's pivot point, our line in the sand is 77.50

First resistance is the overnight high crossing at 78.68
Second resistance is the reaction high crossing at 80.40

First support is the 20 day moving average crossing at 75.39
Second support is the 10 day moving average crossing at 74.85
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Natural gas was higher overnight as it consolidates some of last Thursday's decline. Stochastics and the RSI are overbought but are neutral to bullish signaling that sideways to higher prices are possible near term.

If February extends this month's rally, the 87% retracement level of the October-December decline crossing at 6.077 is the next upside target. Closes below the 20 day moving average crossing at 5.322 would confirm that a short term top has been posted.

Natural gas pivot point for Monday is 5.723

First resistance is last Thursday's high crossing at 5.984
Second resistance is the 87% retracement level of the October-December decline crossing at 6.077

First support is the 10 day moving average crossing at 5.704
Second support is the 20 day moving average crossing at 5.322

Just click here for your FREE trend analysis of UNG

The U.S. Dollar was lower due to profit taking overnight as it consolidates some of this month's rally. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near.

Closes below the 20 day moving average crossing at 76.90 would confirm that a short term top has been posted. If March extends this month's rally, the 38% retracement level of the 2008-2009 decline crossing at 79.72 is the next upside target.

First resistance is last Tuesday's high crossing at 78.77
Second resistance is the 38% retracement level of the 2008-2009 decline crossing at 79.72

First support is the 10 day moving average crossing at 77.90
Second support is the 20 day moving average crossing at 76.90

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Crude Oil and Natural Gas Technical Outlook For Monday Morning

Nymex Crude Oil (CL)

Crude oil's rise from 68.59 extended further to as high as 78.68 so far. The strong break of 61.8% retracement of 82.0 to 68.58 at 76.87 suggests that choppy fall from 82.0 has completed. Intraday bias remains on the upside and further rise could be seen to to retest 82.0. On the downside, below 76.29 minor support will turn intraday bias neutral first. But another rise is now in favor as long as 71.21 support holds.

In the bigger picture, the strong rebound from put crude oil back above 55 days EMA and dampens the bearish view that it has topped out at 33.2. We'll stay neutral for the moment with focus on 82.0 resistance. Break there will indicate that whole medium term rise from 33.2 is still in progress. Nevertheless, focus will remain on reversal signal as we'd expect such rise to conclude inside 76.77/90.24 fibo resistance zone.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

Nymex Natural Gas (NG)

At this point, natural gas is still limited by 5.929 resitance and consolidation from there is possibly still in progress. Another fall might be seen to 38.2% retracement of 4.157 to 5.929 at 5.25. But downside is expected to be contained well above 4.837 support (61.8% retracement of 4.157 to 5.929 at 4.834) and bring rally resumption. Break of 5.929 will target 38.2% retracement of 13.694 to 2.409 at 6.72 next.

In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005 and might have completed at 2.409 already. Rise from 2.409 should not be completed yet and we would continue to anticipate an upside breakout of the recent range of 4.157/5.138 eventually. Above 5.318 will target 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. Nevertheless, break of 4.432 support will dampen this bullish case and turn outlook mixed again.....Nymex Natural Gas Continuous Contract 4 Hours Chart.

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Sunday, December 27, 2009

Holiday Gold, Oil and Index Trend Trading

Another holiday trading extravaganza!!!

Last week the market fell into its regular holiday tradition of light volume, as institutions and big traders enjoyed the holidays thus allowing prices to drift higher. We still have one more week of light trading volume before this year and holiday season is officially over.

Trading during low volume times is regularly misinterpreted. Many traders figure they should not be trading this time of the year but from my experience, the last two weeks of the year are amazing for short term swing plays or day trading. The market seems to be much more predictable when the large program traders are not involved.

Also the more speculative plays (small and mid cap stocks) always seem to out perform as buyers bid the prices higher into the light selling volume. This is most likely why we are seeing the NASDAQ and Russell 2000 indexes making some nice gains of late.

Take a look at the charts…

Broad Market & NASDAQ Low Volume Rally

GLD ETF Trading – Daily Chart
Gold prices broke down as expected in early December and are now nearing a possible bottom. The past 3 weeks have provided some very exciting day trades shorting spot gold prices. In the next few weeks I will be starting to provide more spot gold charts and intraday price action for all the international traders and futures traders 

I did not provide the chart of silver as it trades very similar to gold. When the time comes I will provide detailed analysis for entry and exit points for members.

Crude Oil USO Trend Trading
USO fund had a very nice pullback in early December and I pointed out a spec play at $35.50 with targets set at $37, $38 and $40. So far the first two profit taking targets have been reached.

Sorry for all the lines on the chart but sometimes it’s the only way to remember where all the crucial levels are for trading pivot points.

Natural Gas UNG Trend Trading
Natural gas trades like a bucking bronco. It’s a tough ride if you do not understand market psychology and apply strict money management to your positions.

Last weeks price action closed with a bearish candle after testing resistance twice. We could get a short trade this week depending on what happens from here. Let’s keep our eyes open for a low risk setup.

Market Trends Trading Conclusion
This year has been fantastic for making money, but next year will most likely be much more difficult if we see the market top and head south or trend sideways. The market topping is not an event; rather a process and trend following systems will start having more losing trades than winners as the market momentum shifts from up, to sideways then down.

Don’t get me wrong, I am not saying I think its going to roll over and head south, cause quite frankly no one knows what its going to do from this point forward. This is the reason we are in cash and patiently awaiting new low risk opportunities to place our money. The joy of trading with technical analysis is that you don’t care which direction the markets go because the analysis, if done correctly, allows you to profit in all market conditions using different trading strategies.

The board market, in my opinion, is way overbought due to the holiday rally. But we must remember there is another low volume week as we approach New Years and this could extend the rally more. Smaller trading positions should be used until we enter the New Year and volume steps back into the market.

Gold and silver are in a short term down trend and trading near a resistance level. We could see prices drop quickly or rally from here. So we are letting things unfold before making a commitment.

Oil continues to move higher and last weeks weakening US dollar helped give oil a boost.

Natural gas is trading at resistance and looks ready to head back down. The daily and 30 minute chart did not setup a signal to short Natural Gas, but it was very close.

As usual, I will update on the market and provide daily updates and trades to members.

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The dollar gained versus the euro and yen on speculation U.S. companies are bringing back earnings on overseas assets before the end of the year. The greenback strengthened against 13 of its 16 major counterparts on prospects U.S. reports tomorrow will show the world’s largest economy is recovering, backing the case for the Federal Reserve to withdraw emergency stimulus measures. The yen fell for the first time in four days versus the dollar after Japanese Prime Minister Yukio Hatoyama unveiled a record budget of 92.3 trillion yen ($1 trillion).

“There seems to be last minute repatriation by U.S. firms before year end,” said Yuji Saito, head of the foreign exchange group in Tokyo at Societe Generale SA. “This is helping to boost the dollar.” The dollar rose to $1.4372 per euro as of 8:30 a.m. in Tokyo from $1.4411 in New York on Dec. 25. The U.S. currency advanced to 91.55 yen from 91.11 yen. The euro traded at 131.57 yen from 131.64 yen.....Read the entire article.

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Thursday, December 24, 2009

New video: The Natural Gas Trade

Dan Dicker, expert trader, and Chris Jarvis, president and founder of Caprock Risk Management, break down their bullish stance on natural gas and how to play this sector.

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Natural Gas Falls After Stockpiles Decline Less Than Expected

Natural gas futures fell in New York after the U.S. Energy Department released its weekly stockpile report that showed inventories declining less than expected. Natural gas in storage fell 166 billion cubic feet last week to 3.4 trillion cubic feet. Analysts expected a drop of 172 billion cubic feet, according to the median of 21 estimates compiled by Bloomberg. Natural gas for January delivery fell 10.7 cents, or 1.8 percent, to $5.714 per million British thermal units at 10:31 a.m. on the New York Mercantile Exchange. The futures were trading at $5.907 before the report was released at 10:30 a.m.

Gas stockpiles reached a record 3.837 trillion cubic feet in the week ended Nov. 27, according to the department. Inventory declines have averaged about 2 trillion cubic feet in each of the past three winters. A similar drop this season would leave supplies at about 1.8 trillion cubic feet in April, or about 300 billion higher than average for that time of year.....Rad the entire article.

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Crude Oil Bulls Maintain The Advantage Into Short U.S. Session

Crude oil was higher overnight as it extends Tuesday's rally above the 20 day moving average. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term.

If February extends this week's rally, the reaction high crossing at 80.40 is the next upside target. Closes below the 10 day moving average crossing at 74.11 are needed to confirm that a short term top has been posted.

Thursday's pivot point, our line in the sand is 75.97

First resistance is the overnight high crossing at 77.48
Second resistance is the reaction high crossing at 80.40

First support is the 20 day moving average crossing at 75.29
Second support is the 10 day moving average crossing at 74.11

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Natural gas was higher overnight as it extends this week's rally. Stochastics and the RSI are overbought but are neutral to bullish signaling that sideways to higher prices are possible near term.

If February extends this month's rally, the 87% retracement level of the October-December decline crossing at 6.077 is the next upside target. Closes below the 20 day moving average crossing at 5.304 would confirm that a short term top has been posted.

Thursday's pivot point for natural gas is 5.759

First resistance is Monday's high crossing at 5.979
Second resistance is the 87% retracement level of the October-December decline crossing at 6.077

First support is the 10 day moving average crossing at 5.665
Second support is the 20 day moving average crossing at 5.304

What do all market wizards have in common?

The U.S. Dollar was lower due to profit taking overnight as it consolidates some of this month's rally. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near.

Closes below the 20 day moving average crossing at 76.76 would confirm that a short term top has been posted. If March extends this month's rally, the 38% retracement level of the 2008-2009 decline crossing at 79.72 is the next upside target.

First resistance is Tuesday's high crossing at 78.77
Second resistance is the 38% retracement level of the 2008-2009 decline crossing at 79.72

First support is the 10 day moving average crossing at 77.78
Second support is the 20 day moving average crossing at 76.76

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Crude Stays Strong Ahead of Holiday But Yet to Confirm Correction is Over

Despite thin trading ahead of long holiday, crude oil price's near term outlook remains strong. Currently trading at 77.2, the February contract is hovering around the highest level in 3 weeks. After plummeting to as low as 68.59 on December 14, the black gold has rebounded steadily as inventory levels from developed economies declined, showing signs of demand recovery. However, we are yet to confirm if crude oil has resumed the rise from 33.2 (January 2009) until price can trade sustainably above 80. On monthly basis, December will be a volatile month but actual gain or loss will be minimal.

Natural gas soars for the third consecutive day and has gained +1.4% so far this week. The market sentiment has turned after gas inventory dropped in the past 2 weeks. Later today, the US Energy Department will probably report that gas storage declined -171 bcf to 3395 bcf in the week ended December 18.....Read the entire article.

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Wednesday, December 23, 2009

10 Days of Indexes and Commodities

It’s been a great year as we head into the final few trading sessions. The past several weeks the indexes have not done much of anything which is why we are now in cash.

I feel as though the market is about to change direction abruptly in the coming days or weeks. I feel this way for several reasons:

1. NYSE, Dow Jones, S&P500 are all drifting higher into resistance levels on the 10 day, 60 minute charts. Light volume tends to favor higher price hence the reason for the holiday rally.
2. Broad market momentum waves are topping
3. These same indexes are trading at resistance levels from early 2008
4. Money flow is indicating large institutions have been big sellers over the past 3 weeks.
5. US economy I think is worse than most want to think

So take a look at these 10 day charts which clearly show resistance and support trend lines. Each, if broken will lead to a sharp decline. I used ETF’s as substitutes for the indexes.

Dow Jones – DIA – Top Chart
SPY – S&P500 – Middle Chart
NYSE – Bottom Chart

Stocks have started to decouple for the US dollar in recent days so I am not focusing much on what affect the dollar will have on the above indexes.

That being said, the US dollar (UUP etf fund) is at a pivotal point. It’s either going to bounce off the trend line support level (blue line) and send gold back down to test the previous low, or breakdown through the support trend line. A falling dollar will give gold some power to muscle its way back up to the next short term support level.

Yesterday (Tuesday Dec 22nd) we said gold stocks and silver prices would move higher. I consider gold stocks and silver my leading indicators for the price of gold. Today (Wednesday Dec 23rd) gold stocks and silver shot higher – out performing gold by 7:1 which is very bullish for gold.

Crude oil had a large rally today sending the USO oil fund surging 3.5%, confirming a bounce off our support level 2 weeks ago. It could be warming up for another rally.

Natural gas opened lower but put in a strong session as it trended up all day. This also looks very strong and if prices breakout and follow through next week natural gas could be making a real rally for once.

This is a short trading week with Thursday only a half trading session and Friday being closed for Christmas/Holidays. We will not have any low risk setups this week and because we are sitting in cash, let’s take this time to enjoy our family, friends and pets 

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