Friday, June 7, 2013

Crude oil developing massive triangle formation

Crude oil's weekly chart shows a fairly well-defined, colossal triangle formation:


Source: Finviz.com

What's interesting is after about five years in the making, the formation of the triangle's apex is near complete, meaning we will soon observe a breakout. As I've written recently, my expectation has been for crude oil to break higher from here given that energy equities have been performing well and in my experience equities tend to lead their associated commodity. 

The weekly chart of the Guggenheim S&P 500 Equal-Weight Energy ETF looks bullish to me:

Source: Stockcharts.com

The ETF successfully broke out of a developing triangle earlier this year, and more recently has broken out again. Price has since retreated to the breakout level -- a fairly common and often healthy occurrence -- with $72 serving as support.

The above is an absolute price chart. How does RYE look relative to the market?

 Source: Stockcharts.com

The chart above is RYE vs. the equal-weight S&P 500 ETF (RSP) and as with the absolute chart, it appears bullish to me. Relative performance recently broke out of a triangle and ever since has been trending higher.

All in all, a bullish outlook for energy equities tends to be bullish for crude oil. Stay tuned.

5 comments:

  1. I thought that with NG so cheap oil was heading down! Let's face it, no-one has a clue!

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    Replies
    1. Anonymous II
      Actually, NG has been priced so low of recent years as to make it, among most companies, less profitable or not profitable at all to pursue development - evidenced by the shift to producing NG mixed with higher value liquids by those companies possessing such resource. I think NG has to come up in price versus dragging oil down.
      Plus, With American West Texas Intermediate's lower price spread compared with most of the rest of the world's European Brent, companies operating in America have incentive to develop both NG and oil at higher prices because they still would be able to pass on both commodities at net savings to end users - and the situation would be further enhanced when the political logjam breaks on exporting both oil to Brent paying countries and LNG where demand lies. Of course, such break assumes our government is on its people's side of economic strength and not just wanting to neutralize us in favor of a new world order.

      Delete
  2. Anybody who writes about a "new world order" has automatically lost the argument. And anyone who invests on that assumption has made a losing trade.

    The oil companies are their own world order, responsible to no government, and they will not allow the status quo to change at their expense.

    ReplyDelete
  3. I am amazed at the people down on oil and gases, the big boys and I mean the big ones are so hammered it is funny that they are still in business. You take every Govt. agency that survives off just inspecting them etc. and the safety record just for them is crazy. The being big and self insured is even funny. Why would one say that, well they outsource everything now, sure they have there own number crunchers and safety dept. but those are cut everyday. They are basically just a name to blame, you can not look around your house or go anywhere or do anything because they all need oil or one of it's byproducts. Then on top of that the taxes they pay which we all think is not enough is more than the profit they make, how many businesses can survive that. None except the Govt. and they print there own money and are loosing that battle with hyperinflation. The world runs on oil but in your car on or cell phone nobody which would not exist without oil people complain. Just remember until there is a new fuel. Oil is the life of the planet they are these companies of progress what will be next. The wheel the horse led to horse power the train the nuclear plants which it would take over 7 thousand new plants to do oils job, but even if you had them, there fuel is minimal, just like wind solar bio and all others but we have Nat Gas in all forms but the same people that complain with there oil phone which is a byproduct of oil can't see the picture. How much time elapsed between the wheel , train, boat, and plane did it take to change. When Obama judges the carbon imprint of coal from electricity the numbers show the biggest user in his formula for pollution is the micro wave and you might think that is when it is being used, no he judges the stand by time that it is plugged in the wall to see the time clock while not being used and charges the coal companies carbon credits for that. EIA .GOV is taking us back to riding your bike and throwing a spear to keep his green peace vote happy. Coal plants and mining are many but micro waves are more and Inever saw anyone using coal in one yet, that is how stupid this green thing is, and all the complainers use all the devices that make the pollution to make there lives better. Chris Martenson PHD read his book on Crash Coarse democratic or republican it does not matter and it is backed up with all the Federal Mandates. You will not believe what is happening but it is simple to read and verify this Best Seller. Your childrens future depend on this not complainers that use the devices made of this to complai.

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