Hi Traders – Back in August I made a rather outlandish call that crude oil would move into the 20’s on CNBC. I also posted the video below here in the Man Cave for you. Many thought I was crazy, but just 5-months later here we are. Just wanted to give you a heads-up that CNBC’s Brian Sullivan credited me with the call on air today
The premise of the trade was based on two key concepts we discuss constantly here at TradingAnalysis.com. The first is when looking at longer-term charts, it’s more accurate to adjust your chart settings to semi-log rather than the default arithmetic settings. When doing our beloved Fib analysis, the adjustment to semi-log will actually change where your Fib levels calculations as your now studying percentage change rather than price change, a key difference. The second part of this analysis was a simply measured move from the pre-credit crisis high in 2008 and then projecting lower from the counter-trend rally in 2010. The credit crisis decline measured out to be a 77% decline. When compared to the on-going decline that began in 2011 at $114.83, a 77% decline projects $26.15. The actual lows was $26.05. Damn, I missed it by a dime. We’ll try harder next time. Of course I’m being sarcastic and I’m not holding myself out to be a financial genius. All the economic and fundamental models with billions of dollars behind them in research costs can’t predict markets as well as you can with a $50 monthly subscription to a charting package with Fib tools.
I can’t guarantee this will be the low, but looking at the Fib butterfly pattern below I’m feeling a key low could forming between $26.80 and $24.20. Crude may have just been saved from drowning. This was major factor of why we covered our shorts in the stock market yesterday and came in net long. We are still carrying out SPY put credit spread, our FB call debit spread (with short calls above to lower our cost) and a EEM call debit spread that has been dead for weeks. But if crude does rally, emerging markets are highly correlated and could come screaming back.
(This post was made available to our subscribers on August 14th, 2015. But due to the traction that this story is getting in the news, I have made it publicly available. Have a listen to the thought process behind the $26.00 call.
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