Market Talk with Piranha is currently moving to its new home at chrisperruna.com. The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Friday, September 08, 2006

Crude Oil Opportunity?

Oil has recovered every time at the 200-d m.a. Is this a buying opportunity?

We see five opportunities in the past two years at this long term moving average.

Take the trade (buy options if you want leverage or use futures contracts). What ever you do, sell a small loss and move on if it doesn't work. Investing is that simple.




Taking trades with a favorable risk to reward ratio. It seems to me that a long position would be ideal even if I am wrong because the reward could take us back towards $80. I am looking at a 2-3 point loss for a possible 10 point gain (minimum 3-to-1 odds with a possible 5-to-1 pay out).

Cut all losses short if the trade fails! (In December 04, crude cut the 200-d m.a. sharply only to recover).



It’s not about being right or wrong; it’s about being able to push the odds in your favor, take the trade and follow the rules. If it doesn’t work – OH WELL! Move on!

Piranha

2 Comments:

At 4:17 AM, Blogger Yaser Anwar said...

Good chart Chris. 200 day has providesd support but reading this news piece on bloomberg, "Iran, EU Make `Some Progress' in Nuclear Talks"
I believe Oil is set to go lower in asian trading and on monday. Good trade potential in OIH for a 1-2%.

A good time to buy oil would be when it makes front page news on IBD or something that "OIl goes to 50" contrarian sign.

Its a good time now to slowly build small 5-10% positions in top oil stocks such as VLO, Devon etc.

 
At 6:28 AM, Blogger The Market Speculator said...

Chris,
It's funny, I read your post just days after thinking about this trade myself. What stopped me was the difference in price movement this time, as compared to the last few 200 day MA touches. Price peaked and dropped straight down to the MA on the last touches, while there has been a longer consolidation building on this touch, with a break below the devloping support. It looks like it might be a "topping" pattern. However, with the risk parameters you set, it still might be a good trade.

Paul

 

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