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Monday, September 21, 2009

oil... break out or down

The resistance on crude is undeniable at mid 75, and has been in a very tight trading range for some time. So where can it go?

It most certainly can stay in the tight trading range, but fundamentals suggest a target price of approx $50 a barrel. Or so I have been consistently reading. However, that pesky problem of the dollar declining has allowed Oil to stay a float. The interesting fact here is that the dollar collapsed (since July) and oil has not made new highs.

The inherent dollar/oil correlation allows us to now beg the question... why?

I do not have an answer, frankly I do not have time to fundamentally research it to the extent that I would. What I do know is that it represents weakness in the oil market, and I would not be surprised to see oil come down to the low 60s (or the 90SMA on the weekly chart).

If this was to happen, that is when I am looking to enter heavy positions in PBR. (That is despite PBR's need for oil to stay above 65 to keep their fields economically viable.)

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