Oil's Big Reversal
Oil was on the top of my list when it came to what I was going to be watching closely heading into Monday. Why? Because oil started to roll over last week and ended up trading near an important technical level.
The September low around $76 is important technically because below it, there's little to no price support until the low $60s. 👀
If you are bearish oil you want to see price close below and if you are bullish you want to see buyers step up and defend that level.
Early Monday morning the price of oil was trading down more than four dollars on a Wall Street Journal report that stated that OPEC+ was discussing a potential 500,000 barrel-per-day oil production increase.
But, less than two hours later Bloomberg reported that the Saudi officials had denied that they were considering a production hike.
Shortly after, Twitter lit up with Energy Intel's Amena Bakr reiterating comments from Saudi Energy Minister Prince Abdulaziz bin Salman, saying “if there is a need to take further measures by reducing production to balance supply and demand, we always remain ready to intervene.”
Here's how the price of oil responded.
Oil reversed course and within minutes was trading above $80. That was some wild intra-day price action.
This is a good reminder of how important closing prices are vs. the intraday noise. I suspect the big swing lower on Monday caused some panic selling and shook out a lot of weak hands in both oil and oil related equities.
Lately we've been watching how well the energy related stocks have been holding up despite the weakness in crude oil.
At some point something will have to give. Either oil rallies and catches up to the stocks or the stocks eventually suffer a correction.
On Monday morning it looked like we were going to get a nasty correction in the energy stocks but they reversed course along with oil.
At one point XOP (Oil/Gas Exploration ETF) was trading lower by nearly 6% but pared a good portion of those losses and ended the day down 1.9%.
If you are trading this sector or own energy related stocks this is something you have to get use to. Volatility.
Let us know what you think.
Thanks for reading.
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