A Big Explosive Move Coming?

Sunday, October 11, 2009

Contrary to early 2008, oil and the stock market are now marching in lock-step. As the stock market's trading range tightened, oil's has done likewiseand volatility is down.

Can we have an explosive move, up or down from these levels? A tight consolodation like this is a technical sign that a big move might occur soon. Oil is currently trading between 40 and 50 dollars a barrel. These are the support and resistance areas oil traders are watching right now. Over the last two weeks the range in oil trading has become extremely narrow.

However, in which direction this move will occur is difficult to say at this time, but I will think it will be on the upside because risky assets like the Australian Dollar and Stocks have been performing rather well lately.

Much like the stock market indexes, oil must also contend with its 50 day moving average. The first test failed, but we might test again in the next few days.

As for the ETF, USO, the price actually sits below the support area. Its trading range is between 29 and 40 dollars a barrel with an huge surge in volume over the last several weeks. Are long term buyers beginning to accumulate?

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