Back on July 18, I presented this blog suggesting that oil might find support around $44-$45
The chart presented on that blog was one that I have presented multiple times in the past – I am showing its updated data below. As you will note, oil blew through my suggested stopping point of $44-$45. The next point of support might lie around $38 – and failing that, a return to the January lows or somewhere in that price cluster around that time.
Should WTI hold above $38 and hook up, it would be in the process of making a head and shoulders bottom. A neckline of around $50 wold have to be cracked as confirmation of that bottom formation. I haven’t made notations on the chart to support this potential – it’s too early in the game to suggest that as a likely outcome.
We hold a total position of 8% in energy within our equity platform here at ValueTrend.
5% of that position was bought recently as noted on my Top Picks on BNN a while ago (Vermillion Energy). The producers are not yet being hit as hard as the price of oil. Perhaps that because there is the potential of this pullback being temporary.
As a trader, my main concern is to see $38 hold. If it does, I expect to maintain my energy position. If not, I will consider selling some or all out. Yes, the producers will lag behind, but I don’t want to wait for them to play downside-catch-up.
On the upside, if $50 is cracked, I will add to my energy exposure.
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