Crude oil has bounced off of the $50-$52 support level several times since late 2018. It peaked near $66 back in April (which was an old support point in 2018). Currently it seems to have a neartermed resistance point closer to $60. Its bouncing off of that low-$50’s zone and looks to be heading towards $60 again. Will it go higher after that? Who’s to say? The China trade deal will have something to say about how China’s consumption of this commodity will project to the future. So I won’t make any bold predictions for oil’s upside – beyond a call to potentially hit $60 in the near-term.
The commodity is oversold enough to merit a rally. Traders with a shorter termed horizon can consider an ETF that tracks oil, such as OIL-US. It’s a fair bet that we might get very near that $60 target for oil. Or, they can examine the Energy Equity sector via something like XEG – or the individual producers. However, the technical damage seen within the producers has been much more severe than for the commodity itself. You will note that oil is bouncing off of its low-$50’s support, while the XEG chart shows us a significant breakdown in support. Contrarians might view XEG and individual producers within the group as the more oversold opportunity of the two. But it’s also the higher risk play.
For our part, we don’t hold much in the oil space, beyond a small position of one energy producer in our ValueTrend Aggressive Equity Platform. We may add to the trade. If we do, we’ll likely look at direct exposure into the commodity. Again, it’s not a suitable trade for conservative long termed investors. So any extra oil exposure we consider will be strictly within our Aggressive platform – and not in our conservative growth strategy.