Bearish Move in Oil Sets Up Two New Energy Trades

Chris Vermeulen  |

Before we discuss these incredible trade setups in the energy sector, we have to discuss the continued shifting global economy and how that relates to these setups. Nearly three weeks ago, we posted a research article suggesting crude oil would fall to levels near $50 over the next 30+ days, then stall for about 45 days before falling further and potentially attempting new lows near $40. It is important to understand certain aspects of the global economy and economic demand, and how they relate to seasonal patterns for energy.

We believe the move lower in crude oil is related to a supply glut that continues to plague the global markets, while global economic trade and shipping activity continue to weaken. Too much oil supply with weakening global economic activity means crude oil will likely waffle lower until this dynamic changes.

Please read our recent research post to know where crude oil is likely to head next. Also, this crude oil prediction uses our oil price DNA algorithm to show us the future price range of oil.

Other energy-related instruments, like natural gas and Direxion Daily Energy Bear 3X Shares ( (ERY)), are set up for a different type of price move.

Once crude oil reaches to levels near $50, it is very likely that a support level will push crude back higher (as we suggest in our research) which will align with a seasonal pattern for natural gas and early winter demand for heating oil. September, October, and November are typically a ramp-up period for winter demand and end of year holiday travel. People tend to take advantage of the last bit of summer to seek out vacation spots, prepare for winter and push the cold back as long as possible.

Future contracts may move higher, in preparation of this seasonal trend, many months before the season actually starts. This is the reason we believe the energy sector is setting up some incredible opportunities for skilled technical traders.

The weekly chart of natural gas

This first weekly chart of natural gas highlights a basing pattern that we've been following for months. We believe any move below $2.30 is a strong bottoming/basing setup for skilled traders and our predictive modeling systems suggest we are just weeks (3 to 5+) away from a big upside move.

We believe natural gas will continue to fall and base. Once a bottom has been made the upside potential for natural gas over the next 60+ days is quite substantial. We believe an initial upside move after it bottoms will be to levels above $3.15 before October 10, and that the potential for an extreme breakout upside move above $4.00 is quite likely before the end of November 2019.

Please read this article to learn more about our research into natural gas and the opportunities that are setting up now. Also, this post we shared, Natural Gas Moves Into Basing Zone.

Click to enlarge

ERY – Bear Energy Sector Chart

Keep in mind that the setup within the energy sector is two-fold. First, oil and natural gas will continue to fall and base/bottom (moving slightly lower over the next few weeks). This is why ERY is such a great setup right now. Any breakdown in energy commodity prices over the next 3~5 weeks will push ERY 15% to 25% higher from current levels – which is exactly what we are expecting to happen.

Then, as crude oil and natural gas base in their support zones, ERY will peak which is when we'd recommend pulling profits from ERY and watching other bullish energy ETFs for long side setups.

From current levels, we believe ERY will target $50 to $52.50 fairly quickly as crude oil and natural gas continue to move lower and setup a momentum base within the basing zone/support range. Remember that crude oil should move to levels near $50 (a full 10% lower than current price levels) before basing.

Click to enlarge

Concluding Thoughts:

As we've been suggesting for months, 2019 and 2020 are setting up to be incredible years for skilled technical traders. These moves in commodities, energy, and metals are providing us with trade after trade of 10%, 20% or more. Almost every month, the markets are setting up 10 to 15+ incredible trading opportunities and all we have to do is time our entries and run these trades as we do any other trade. Not all trade setups are the kind we like, and we only enter the ones that we think have the highest opportunity and lowest risk.

Get ready because these incredible setups in metals and energy should keep you busy pulling the trigger to create profits over the next 5+ months or longer with my Wealth Building & Global Financial Reset Newsletter.

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Equities Contributor: Chris Vermeulen

Source: Equities News

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer. The author of this article, or a firm that employs the author, is a holder of the following securities mentioned in this article : none

Companies

Symbol Name Price Change % Volume
ERY Direxion Daily Energy Bear 3X Shares 53.24 0.85 1.62 161,006

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