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OIL short rationale

Commodity prices continue to plummet and oil is showing a pattern of resistance at the 10 day moving average (dma).

This article is an update on my current position shorting OIL (via an inverse ETF) with the purpose of pointing out trading strategy rationale and chart reading techniques.  (see below chart)

  1. I’ve held this position since late April…note that it wasn’t profitable for over 2 months…patience is a virtue.  Swing trading isn’t about getting rich quick.  It’s about identifying trends and then capturing profits with the use of disciplined trading techniques.
  2. The initial entry point was a calculated risk to anticipate a break below the 10dma. Markets can not be perfectly timed.  Trading is about taking risks and setting limits to avoid catastrophic loss.
  3. Slide & Peak pattern…note how the price tends to SLIDE lower, then quickly rises to a failed PEAK which HAS NOT exceeded the 10dma since June 24 2015. This is an example of PERSONALITY; use it to anticipate price moves.
  4. Price is nearing the low of March 17 2015…this is likely to act as SUPPORT. If the price bounces off support and above the 10dma, then I would consider selling to preserve profits.  If it breaches support, a 5-10% drop to the next level is probable.
  5. I’m forecasting lower OIL prices due to slowing global growth. However, that same logic clouded my judgement during a similar trade in March and because I ignored a breakout above the 10dma, a substantial profit evaporated.  I don’t plan to make a similar mistake this time.   When trading OIL, always consider its volatile nature, which is a reflection of Middle East politics…an explosive price spike is never far away.
  6. NOTE- this article only addresses chart techniques. In addition to charts, I use a holistic trading strategy that also considers fundamentals and steely observation.

I believe that OIL is the primary driver of general commodity trends.  It’s unlikely that commodity prices will rebound without an increase in OIL and growth in Asia.

OIL 10dma resistance 150724


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