Options Play: Will crude oil finally stabilize?

September 4, 2014 12:07 PM

Fundamentally, there a lot of moving parts in the crude oil market--or so it would seem. All except for the most important part-supplies.

At any rate, there are sanctions that have been placed on Russia and sanctions that Russia has placed on other countries in retaliation to the sanctions that have been placed on them. Whew! That wasn't easy to get out. On the other hand, there has been talk of Putin putting together a peace treaty for Poroshenko that could end the war between the two countries Russia and Ukraine.

Then there is ISIS the terrorist group that is taking over Iraq and is seemingly targeting another attack on U.S. soil. This just after behead innocent American reporters. The group is spreading from Syria into Iraq and apparently has a hundred members with U.S. passports. If you ask me they are a force to be reckoned with and should be taken seriously. Oh and let us not forget about the Gaza Strip and the seemingly endless battle there.

Really though I look at fundamentals and even more so the technicals of a market. The supply and demand. Right now many of the refineries across the United States are shut down for maintenance. That time between gasoline production and heating oil production. Also this week’s EIA report showed that crude oil supplies dropped by about one million barrels from last week to this week.

On the chart below I have placed my favorite technical indicators. They are the 9-day Simple Moving Average (SMA, red line), the 20-day Simple Moving Average (SMA, green line), and the 50-day Simple Moving Average (SMA, blue line). I have also added the Bollinger Bands (BB's, yellow lines) and Candlesticks (red and green bars), each bar represents one day of trading on these daily charts.

Daily November crude oil chart

This particular formation and the way my indicators are lining up shows me that this market may do sideways for a while. With a high of around $95/barrel and a low of around $92/barrel.

I figured this out by placing my favorite indicators on the charts and studying them which I found at: http://www.markethead.com/2.0/free_trial.asp?ap=mmckinne , which is a web application that we have developed for our clients called MARKETHEAD where I get about 85% of all my research from. That means I get both technical and fundamental research from this web app and I am a veteran series 3 Broker of 15 years. So if I'm using it then maybe my readers should check it out. Yes?







About the Author

Matt McKinney is a full-service options broker at Zaner Group both buying and selling energies, metals, grains, softs, currencies and the 30-year bond market. My strategies include time frames of 45-120 days with the ability to liquidate at any time. I can be reached at mmckinney@zaner.com.

Whether you're a novice trader who wants to participate in options on futures or an experienced trader, you can also check out my blog at http://www.mmckinneyfutures.com/.