Lethargic. Dripping. Steady, consistent price exploration lower. Friday’s swift late day push/squeeze in crude – inducing momentary excitement among bulls and leaving hammer candlesticks across the interpretative frameworks of technicians to hang hope on throughout the weekend- has proved fleeting in this morning’s gapdown and subsequent creation of a new relative crude low. Given oil’s retreat from near 50 in the last month, dip buyers have been met with repeated frustration as rallies fail and price continues to work lower.
Given the relentless upswing in global markets since the rearview mirror Brexit bear trap – an upswing few folks were positioned to profit from morphing into a lack of buyable dips (OA all over this) – will this pullback in oil lay yet another bear trap, before oil makes it move back to 50 and doesn’t look back. In a market where prices levitate incessantly and most participants are sidelined, onlookers scour for every reason to get short this market, to catch the rising knife.
The market pitches a tent in its pants from frustrating participants (extra teepee). Bears may be hanging their hat on oil weakness as yet another reason to not hop on board the bull express, and remain sidelined or take a stab at shorting this market. The short into the hole play at the moment are lines of $DWTI nose candy. I’d be wary of that. Conversely, if oil trades higher, frustrating bears once again, adding more euphoria to a stockpile of ecstasy already collected from the global market rally in equities, then overall market participant sentiment can swing to much higher (extreme) levels, that will then warrant the contrarian short bias. Either way, risk looks manageable here with a quick stop at the low.
Disclosure: Long $COP, $UWTI, $CVI
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