Two Great Conservative Ways to Trade Crude Oil

Recently, crude has been one of the best instruments to trade. As the below chart shows, since Sept 7th it has made no less than three 5% swings within its $68--$72 trading range. Alert traders using a typical 100:1 leverage could have caught a major chunk of those three 500% profit moves. Heck, with a total swing of 15%, even catching 20% of those moves would be 300% profit.




From a technical perspective: As shown in the below chart, Crude is in a multi-month up trend and forming a bullish rising wedge.



From a fundamental perspective: Oil has tended to rise with stocks and risk sentiment, both of which are moving up for now. There are excellent arguments for a coming pullback in stocks, which would likely mean a drop for oil too. Moreover, there is near term oversupply, which could pressure prices near term. However, markets are look to the future, and sentiment has generally overridden near term inventory data.



Trading Ideas

Play the momentum: buy on breaks above $74, or sell on breaks below the rising trend line of the bullish wedge. Just keep a stop loss order reasonably close to minimize losses if the move goes against you



Play the range. Simply try to buy near $68, sell near $74, with stop losses not far from these levels to minimize losses if the reversal doesn't occur. If that's the case, use this as a signal to jump in and play the other direction.



Again, always use stop loss orders

 
 

Crude Oil Daily Chart: Forming Bullish Rising Wedge. Chart Courtesy of AVAFX

DISCLOSURE AND DISCLAIMER: OPINIONS EXPRESSED ARE NOT NECESSARILY THOSE OF AVAFX, AUTHOR HAS POSITIONS IN ABOVE INSTRUMENTS.