Crude Oil is Starting to Crack

Crude oil WTI has been a hot topic since rallying to $130 back in March driving gasoline prices higher and putting pressure on governments to do something to reduce the cost of fuel. 

The fundamentals for higher oil prices continue to be bullish, so why did we make a lower high? Why are we breaking a trendline? Is it all due to demand destruction? 

I will leave those questions for someone else to answer. As a trader, I just care about price. And right now price is not acting bullish. 

When a price of an asset tries to take out an important level like the 2011 high that has stood for over a decade, we can expect some volatility around that area.

In March of this year the price of oil ran up to $130 decisively taking out the 2011 high but it didn't last long as it eventually came right back in creating a false breakout.

However, soon after price did make another attempt to get back above the $114/$115 area and even made a run to try and make a higher high. The attempt at both has now failed.

As simple as it may seem, in my experience a failed attempt to make a new high can be a powerful signal that the trend has come to an end. At least in the short to mid-term.

Right now the path of least resistance is down and the odds have increased that we could see a move back to the mid $90s. 

As for the related oil/gas equities? They have also corrected alongside the price of oil but to a larger degree with many producers trading lower by more than 25% from their recent peak.

Two weeks ago we were taking profits on our long-term energy positions and I wrote about why it made sense to do so here... Energy Stocks - The Trend is Your Friend, But...

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Nothing in this blog post should be considered investment advice and is provided for educational and entertainment purposes only. The commentary and information represent the opinion of the author and are not recommendations to buy or sell any security or investment product. The author may or may not hold positions in the securities and investments mentioned. Full disclaimer here.