As prices bounce off the lows in RBOB, U.S. crude exports are rising and jobs in the oil idustry are falling.
Fundamentally, RBOB unleaded gasoline prices continue to move higher and it would seem like a "no brainer" that prices would continue to rally. I know better. If trading was easy everyone would be rich, so it's important in my view to take into consideration all the factors, bullish and bearish.
Let's look at the bullish fundamentals of the market. It seems low prices have caused U.S. crude exports to be on the rise. In fact, Bloomberg is reporting that exports are on the move from the United States to countries like France, Germany, the Netherlands, Israel, Panama, and yes, China. In addition, we are headed into the summer months and while I firmly believe that there is no such thing as "seasonal" price moves in commodity markets, typically people drive more as the weather gets warmer and increased demand could certainly help higher prices. And finally, there is always the potential for refinery problems as they ramp up activity converting crude oil to gasoline.
On the bear side, lost jobs can't be good for demand. And this is what we are looking at in the crude industry. Low prices have forced many companies to close their doors and even into bankruptcy. In fact, USA Today reports, "Workers in the industry are feeling the brunt. Oil and gas companies worldwide have publicly announced plans to cut more than 319,000 jobs since late 2014," according to Houston energy consultants Graves & Co. That sounds like the same old song and dance. Other bearish fundamentals include large stockpiles and over production by OPEC and non- OPEC nations.
Technically, on the daily chart below I have placed my favorite technical indicators. I call this combination of indicators the "10/20/50/BB/ Trend Finder" strategy. They are the 10-day Simple Moving Average (SMA, red line), the 20-day Simple Moving Average (SMA, green line), and the 50-day Simple Moving Average (SMA, royal blue line). I have also added the Bollinger Bands (BBs, light blue shaded area) and Candlesticks (red and green bars with the wicks).
My favorite indicators show me that we are in a principal trend up which is the strongest form of an upward trend that my favorite indicators can show me. This occurs when the 10-day SMA crosses up and over the 20-day SMA as both indicators are pointing up on the chart and the market trades above the 10-day SMA.
I figured this out by placing my favorite indicators on the charts and studying them which I found at a web application that we've developed for our clients called MARKETHEAD.
Option Play: A potential play here could be a 3 to 1 ratio strategy with call spreads vs. a put.