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Chris Vermeulen
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Chris Vermeulen the founder of AlgoTrades.net Algorithmic Trading Systems. This automated investing system is designed for individual investors and traders. He is also the editor of the TheGoldAndOilGuy newsletter which is designed for gold market traders providing quality ETF Trade Alerts,... More
My company:
AlgoTrades Algorithmic Trading Systems
My blog:
TheGoldAndOilGuy - Gold Market Traders
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Technical Trading Mastery - 7 Steps To Win With Logic
  • WTI Crude Oil & Oil Stocks Seasonality & Year-End Outlook 0 comments
    Oct 30, 2012 1:39 PM | about stocks: OIH, XLE

    Crude oil has had some large price swings this year and another one may be on its way. This report shows the seasonality of crude oil along with where oil is trading and what the oil service stocks are telling us is likely to happen going into year end.

    Since WTI Crude Oil topped out in September at the $100 resistance level (Century Number) many traders are looking for a bounce or bottom to form in the next week. Historical charts show that on average the price of oil falls during November and the first half of December.

    The charts of oil and oil stocks shown below have formed patterns on both time frames (weekly & daily) that lower prices are to be expected. If you did not read my Gold Seasonality Report I just posted be sure to review it here: Gold Seasonal Report

    (click to enlarge)

    WTI Crude Oil Weekly Chart:

    Here you can see that price tends to fall going into Christmas and rallies during the last week of trading. USO chart looks the same. This price action falls in line with Dimitri Specks seasonal chart providing us with insight as to what we should expect. Later this week I will finish my report on the Election Cycle Seasonality report which shows weakness in the market during Oct & Nov when a president is up for re-election.

    (click to enlarge)

    Oil Services Stocks - Weekly Chart:

    If you follow oil closely then you know likely know already that oil related stocks can lead the price of oil by a couple weeks. What this means is that if big money is flowing into oil stocks (bullish price patterns with strong volume), then you should expect the price of crude oil to rise in the coming days. That said, if money is flowing OUT of oils stocks then lower or sideways oil price should be expected.

    The weekly chart oil stocks show a very large bearish head & shoulders pattern. While I do not think the neckline will be broken it is very possible.

    One of the most important pieces of data on the chart is the VOLUME. Notice the lack of it… Volume tells us how much interest and power is behind chart patterns and declining volume clearly tells us these investments are out of favor currently and that big money is not moving into them.

    (click to enlarge)

    Oil Services Stocks - DAILY Chart:

    Zooming into the daily chart of the OIH fund oil service stocks we can see there is yet another bearish pattern unfolding. Another head & shoulders pattern which looks as though it is just starting to breakdown as of this writing. Next support level is $35-36.

    The energy etf XLE looks similar and can be used also.

    (click to enlarge)

    WTI Crude Oil and Oil Service Stocks Trading Conclusion:

    Looking forward 1-2 months (November - December) taking the seasonal price swings in oil, re-election cycle seasonality and price action of oil stocks I feel oil will trade sideways or down from here. With that being said, expect crude oil to rally during the last week of the year. I hope this provides some useful info for your trading!

    Get my Daily Trading Analysis & Trade Setups at: www.TheGoldAndOilGuy.com

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