Crude options play: Crude oil — enough is a lot

July 19, 2016 09:38 AM

Fundamentally, if any market needed regulation in production this one would be it. Whether it be Russia, Canada, the U.S. or Organizaton of the Petroleum Exporting Countries, crude oil producers around the globe continue to pump and pump and pump. They all want their market share of $40 per barrel crude oil.

There is talk of no storage capacity in China. There is talk of tankers stacked up in the Gulf of Mexico. There is satellite imagery on sites like Zerohedge.com of tankers congested off of the cost of Singapore. Despite Goldman claiming the big glut is over, OPEC nations at one point were going to freeze output at maximum capacity.

While weekly inventory reports have claimed draw downs in supply for the last several weeks, it's going to take a ton of demand to make a difference when producers continue drill. It's going to take one heck of a disruption to even begin to put a dent in supplies, in my opinion.

I have added my favorite technical indicators to the charts below. I have coined them the "10/20/50/BB Trend Finder." They are the 10- (red line), 20- (green line) and 50- (blue line) day simple moving averages. I have also added Bollinger Bands (light blue shaded area) and candlesticks (the red and green bars with the candlestick wicks, which on a daily chart each bar represents one day of trading).

On the daily chart above, the market is in a super trend down, which is the strongest form of a technical trend that my indicators can show me. This occurs when the 10-day SMA crosses down and under the 20-day SMA as both indicators point lower on fairly sharp angles while the market uses the 10-day as its top side resistance.

Page 1 of 2
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/.