Monday, January 26, 2015

What to Expect From Here in Oil Prices

I have made several posts recently regarding oil and energy prices and some individual stocks in those industries.  The reason for this is the extreme position of crude oil and the potential profit that can be made on a turn up in oil.  It is not every day or week or month or year that major markets experience the type of dramatic re-valuation in prices.

Based upon history we know that the greater the bear market, the greater percentage gains we expect to make in bull markets, and the more violent the initial thrusts off the low tend to be.  So I am personally looking to catch a shorter term thrust up in the coming days or weeks.  Then my expectation is that we are likely to see a major bottom or bear market low occur within the next couple months.

I have gone back through the history of crude oil prices and made some observation regarding major bottoming processes.  Here is a quick summary of what I believe is important:

  • The winter (Nov-February) has seen some of the most significant bottoms in history
  • There was often a violent rally lasting a week or a few weeks off of the momentum low (low in indicators) which was followed by a modest break to a new final low within 1-2 months later
Given the current position of oil prices is believe we are very near the beginning of the expected violent rally off the momentum low.  Then I would anticipate a retest and or break to new lows over the next several weeks, with February or March being the expected months to bottom.

I have also suggested that looking at energy equities that are not confirming moves to new lows in oil may be the best speculative opportunities at this point.

I recently posted about CHK and it continues to look like it is just resting below a short-covering breakout point which may produce very nice short term burst higher if oil does indeed strengthen even for a week or two.

If you have questions about how to navigate oil and related issues currently, reply or comment and I will try to assist you.

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