Crude Oil futures (NYM.CL) broke a six-day losing streak on Monday with a 'big' one-day gain of 7.1% after losing 16.5% over the previous six trading days. What turned the tide? For one, Commercial hedgers in the market went from net short to net long according to the report released Friday by the CFTC, and taking the other side, the small traders went from net long to net short. Hedgers are often considered the smart money in the commodity markets because they have their fingers on the pulse of the underlying physical market.
The nearby month contract (January) closed on Monday at $43.71 after closing at its all-time contract low on Friday at $40.81 below the lower Bollinger band.
Q: How has the crude oil futures market performed in the past when it has seen at least three days of successive declines which bring the market below its lower Bollinger Band, followed by a 'big' percentage gain in the fourth quarter of the year?
A: According to the 10 previous occurrences of this event, EventEdge indicates that NYM.CL has shown a strong bullish edge that peaks nine trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Monday, Dec. 8, 2008) is Friday, Dec. 19, 2008. NYM.CL rallies in 100% of the cases (10 of 10) by an average of 3.8% relative to the close on the event date. The overall return of the 10 cases is 3.8%, which, based on the close of NYM.CL on the event date ($43.71), provides a target price of $45.37.
If you'd like to see bar charts for all the historical occurrences of this event, or change any of the event building blocks for this trading idea, click here to launch the set of conditions into our EventEdge analysis tool.
Gibbons Burke is editor of MarketHistory.com.
