New Mission, New Website coming soon! Learn more now.

Equities logo
Search
Close this search box.

Crude Oil – Oversold or on the way down to $32.50?

Is crude oil currently oversold, or headed as low as $32.50? The answer could be yes to both, depending on the time frame one looks at. The selloff in crude oil has been sharp, fast and powerful.
Ilan Levy-Mayer has been a commodities broker for over 16 years, and holds an MBA in Finance and Marketing from Hebrew University in Jerusalem. Ilan is currently the Vice President and a Senior Futures Broker overseeing online future trading platforms and Commodity Futures Trading systems at Cannon Trading Company.
Ilan Levy-Mayer has been a commodities broker for over 16 years, and holds an MBA in Finance and Marketing from Hebrew University in Jerusalem. Ilan is currently the Vice President and a Senior Futures Broker overseeing online future trading platforms and Commodity Futures Trading systems at Cannon Trading Company.

Is crude oil currently oversold, or headed as low as $32.50? The answer could be yes to both, depending on the time frame one looks at.

The selloff in crude oil has been sharp, fast and powerful. Six months ago we were trading at $107! This week's low was $53.50 – EXACTLY HALF the value from June 2014.

Warfare with Markets Instead of Bombs?

It is my pure speculation that we are seeing a "new era warfare" – and again, I emphasize, my pure speculation – rather than missiles and bombs, nations of the earth are using economics and technology. If by chance I am correct, then right now the US/West is winning: Low crude oil prices are allowing the U.S. to help defeat ISIS, Iran and Russia in a number of ways that are arguably far more effective than conventional war.

From the trading perspective, the daily chart is extremely oversold, and I think a bounce of $3 to $5 can happen any time. However, the trend is down on the daily, weekly and the monthly and looking at the monthly chart below, I cannot rule out a test of $32.50 within the next few months.

 

 

Depending on one's risk capital and preferences, short term options may be a "lighter way" to speculate. If you are only buying the option, then your risk is limited. Crude oil futures have monthly options with good volume on many strike prices. Another way is to use vertical call or put spreads and take advantage of the high premium, some out of the money options have because of recent volatility.

There are many ways to trade any market, many ways to lose money in any market, and only a very few ways to lock in gains – and this one is not different. If you need help creating a trading plan, visit our broker assist services.