Everybody is worried about Crude Oil prices. Yes, it has doubled from Jan 2016 levels and has reached a level where it's making lots of people very uncomfortable. Well, that's what traded assets do - they test the conviction of believers by doing crazy thing.
Once Upon a time in 2014 - this was the state of Crude Oil
Global Oil prices have been very stable since last two-three years trading in a band of $10-15
— Deepak Singh (@smarket) July 2, 2014
It was very obvious back then -
Brent Crude is ready for big move. Here’s why? http://t.co/b41kS50pvc
— Deepak Singh (@smarket) June 4, 2014
Here's what the state of Brent Crude was back in June July 2014-
A breakdown happened below 200 week moving average and you see what happened in following 1.5 years
It's a great chart that tells you why one should never, I repeat, never bet against the trend. All this fundamental talk does not help. Now once the market prices in the worst case scenario in downtrend - the new reality and fundamentals set in. The market moves to rangebound state where producers find new pricing factor to survive
What Brent Crude is doing right now - testing market's ability - how high it can tolerate? It's fascinating that Brent Crude is right at the same moving average resistance from where it tanked last time. Ideally, the resistance should work but when market becomes rangebound - they are not the Ultimate resistance
It's a fundamental fact - that Crude producers do not have pricing power and Shale + Renewables have altered this market for good. Hence what we are witnessing now - Brent Crude testing market's tolerance to high oil prices.
What people are missing to read about this Crude fall?: US is now major energy producer and shale is going to cap any crude rally.
— Deepak Singh (@smarket) January 14, 2015
This is one reason that no International rating agency is worried about inflation emanating from higher Crude prices. Also none of the Oil stocks are showing any great enthusiasm because investors know this is not sustainable. This is the new Fundamental and price movement will reflect it
Crude eventually will settle down in $40-$60 range and it will be boring asset with world flushed with Oil thanks to fracking
— Deepak Singh (@smarket) November 29, 2016
Thanks for your time. I hope the article helps you understand the power of charts. Please share your thoughts, comments below. I will highly appreciate that. Also, do share the article with your friends if you like it
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers