Is Oil A Good Investment Hedge?

Summary

• History shows investing in oil and commodities due to geopolitical events is not wise, and price spikes are short-lived.
• $VIX, the “investor fear gauge” indicator, tells us that we have lived in fear since the war in Ukraine started but are better off than in March 2020.
• Retail investors investing in oil is like investing in Zoom and Peloton at the pandemic’s peak. A price crash could be too sharp to recover from, similar to 2008.
• In the short term, crypto offers a better upside with a 70% upswing in the past 30 days.
• This article shows how using the 200-day simple moving average (SMA), Bull Market Support Band, and Heikin Ashi Candles can help navigate.

Commodity prices have spiked to an all-time high (options strike price is now at $200) especially the oil-related assets and investments like ETFs. Some analysts predict that crude-oil prices will rise to $150 a barrel. Ht So, is it time to invest in oil? For long-term investments of more than four years, the simple answer is no, but only if you have a correct understanding of the reasons behind the fluctuations. Investing in commodities due to geopolitical events and uncertainties would likely be the wrong reason. As Andy Serwer, editor-in-chief of Yahoo Finance put it, “over time we recover and move on. Meaning at some point, Putin will fail. Sadly there will be much pain and suffering before then.” That said, the uncertainty and supply disruption in oil in the short term has led to the bullish upward trend.

Nonetheless, the damage, suffering and potential devastating commodities and food shortage that the war in Ukraine has caused and will continue to cause cannot be discounted. During these challenging times, we need to step back and see the big picture of past and current trends, especially for retail investors, to better evaluate and consider whether oil and commodities are good long-term investments or short-term trades. Although there are many fear sentiments projected in the general and financial media, we should take them with a grain of salt. Therefore, below are some detailed reviews of historical performance data and straightforward technical analysis and indicators to properly navigate the volatile oil market.

Investor fear index: high but less than 50% of pandemic

As scary and volatile as the situation and market are, we should have grown more versatile after going through the critical stages of the COVID-19 pandemic. In the financial market, the Chicago Board Options Exchange's Volatility Index (VIX) is a

Analyst’s Disclosure:I/we have a beneficial long position in the shares of BRK.B either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.