Commodity Chart Of The Day: Crude Oil

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 |  Includes: DBO, USO
by: Matthew Bradbard

Commodity Chart Of The Day

Daily Crude Oil

(click image to enlarge)

Click to enlarge

As of this post, crude oil is lower by 3.16%, hitting my second target at $89.25 early this morning. See previous posts. Continue to use the Fibonacci levels as your targets, as a trade under $87 in November futures is my third and final target. I will keep traders abreast, as I am not clear on if I will be reversing under $87 or looking to buy at lower levels. I will react depending on the price action. I think a lot of this will have to do with outside market forces in the coming weeks.

The fact that the distillates finally look like they are starting to move lower should support further weakness. In recent weeks and months, it has been the tail wagging the dog, with RBOB higher by 35% and heating oil appreciating 27% in the last four months.

My favored play for bearish crude oil trades is shoring futures while simultaneously selling out of the money puts. The idea is you make more money in the futures than you lose in the options. This strategy lowers your margin, and also cushions a loss if the futures move in the wrong direction. It is not foolproof, but in my experience, it allows more flexibility than outright futures or options plays.

Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.