Monday, March 21, 2011

Trends in Crude Oil Historical Chart

This is price history of notable tops and bottoms in Crude Oil on a 4hr time-frame beginning on 12/14/2009 to 3/16/2011. I've come to the conclusion that there are 4 primary fundamental factors in deciding the price of crude oil:
1) The Middle East
2) The Middle East
3) The Middle East
4) The US dollar policy

Ok so that wasn't very comprehensive but in looking at the biggest factor it was always situations in the middle east. Demand, forecast, analyst opinion, crude oil inventory, and the state of the economy could all be thrown out the book. The only thing that was consistent was factors that had to do with the middle east, more factors to do with the middle east, yet more factors to do with the middle east and the US dollar policy.

What I found very interesting is when ever there was a surge in Crude Oil analyst would make predictions of $100+ crude. While yes that's easy to say now as we are above $100 but often when they made those claims crude oil would correct to the downside and sometimes immediately afterwords. Had you followed their recommendation you would likely have abandoned the trade or faced margin calls. Unless you had very deep pocket you would not have seen $100 crude. Of course if you did the opposite it would have been very profitable in the short term.

(If there are problems viewing picture go to this link: click here.)

The analyst proved to be wrong most of the time. Some long term calls were right but it seemed these calls (on long side) were at market tops most of the time. The news was very deceptive and reasserts my position to only use charts to determine market trends and but be wary of major market events that cause volatility.

Many (actually most) news events were contrarian indicators. Using the news can be utilized if knowing what to look for.

No comments:

Post a Comment