In part 1 of our commentary, we discussed the current Fundamental Gravity of our “Slowing Drag...
Bottom for Oil?
02/10/2015 9:00 am EST
Oil prices have been under pressure, to say the least; since reaching the 2014 high of $107.95 in June, the commodity is down 57%, observes Joon Choi, contributing editor to Systems & Forecasts.
iPath Goldman Sachs Crude ETN (OIL) is an exchange-traded note that tracks crude oil.
Technically, OIL had been in a slightly down-sloped trading range from 2010 to the middle of November 2014. But in November, it broke down through the range and has been trying to find a support ever since.
Meanwhile, the decline in prices has accelerated recently compared to the rate of the previous leg down. This pattern is significant because it generally provides a clue when the underlying vehicle is due for a bounce.
With the angle change completed near the weekly support area, we should see some stabilization and possibly a sharp reversal of oil price.
Another vehicle with direct exposure to oil is the United States Oil Fund LP (USO), which is structured as a limited partnership. This means shareholders will receive K-1s, which may be a burden at tax time.
However, there is no K-1 for OIL because it’s not a limited partnership but rather an exchange-traded note.
USO invests in near month oil futures, so it will track the spot price very closely. Hence, this product is a good vehicle for active traders who want to gain better exposure to spot oil prices.
Investing in oil is a volatile proposition and it’s not for faint of heart, but I believe oil prices finally found a support and will stop falling.
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