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I can’t consider any stock or future without first looking at a chart – so let’s get straight to it – a simple unadulterated daily line chart:
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Like many commodities oil has shown great strength in the last few weeks but if we look at a micro picture we can see that it struggled for a while and just range traded for a month – stuck between $46 and $55.
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Key now is can it hold $55 and continue the up and up?
You can see that this week it burst through the $55 level – up 4% overnight on Wednesday – but this is a far cry from $140 July 2008. Can you believe it oil that high and the world was slipping into recession.
Yes just goes to show how at times the fundamentals can be so much out of whack!
So does the same hold true now? Is oil at $56 an ok level? Again we could employ a room full of economists to let us know the answer or we could say it sounds sort of ok. But remember our answer does not have to be too rational as we saw in mid 2008 oil at $140 was certainly not rational. And don’t blame OPEC this time!
What about we turn to our trusty technicals:
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Well you can see in the bottom right hand corner a tiny Elliott set up that says we might see oil at about $60 +/- and then we may see some softening that may take oil much lower:
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Might this also be the same for other key commodities such as copper which has been on one big party now for almost six months?
Enjoy the ride
Tom Scollon
Chief Analyst
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