Sunday, February 12, 2017
OVX Oil Volatility and WTIC Oil Weekly Charts; OVX 2-1/2 Year Low; WTIC Rising Wedge; Negative Divergence; Overbot
The OVX oil volatility sinks to a 2-1/2 year low signaling complacency with oil prices. Oil prices are moving sideways remaining buoyant so traders are not concerned about a downturn. The green circles show high volatility with panic in the streets, when the bottom occurs for oil prices, and the red circles show the low volatility, and party atmosphere, that leads to tops in oil prices. What do you think will happen?
The red lines indicate negative divergence and a move lower in price would be expected in the is weekly time frame. The stochastics are overbot. The RSI, however, has not moved into overbot territory to the upside may not be finished for oil prices on the weekly and monthly basis. A supply disruption in the Middle East due to escalating wars would send prices strongly higher.
The difficulty with trading oil is the market is very emotional right now. Traders are watching to see if the OPEC producers and Russia are sticking to their production agreement, or not. The news last week about over 90% compliance with the agreement sent oil prices skyward. However, that was cheesy because if you backed out the data and looked at the Saudi and other Middle East producers they are about 60 to 70% compliant which is about what to expect. In other words, they all cheat on production numbers it is simply a matter of how much, and they are cheating now.
The oil inventories were huge builds last week so that will be key this week to see if the inventories remain robust. Oil is sloshing around everywhere but oil prices remain buoyant on the hope that the OPEC production freeze will hold and that the North American producers will not add too much to the oil supply. That is a lot to hope for.
The OVX is positively diverged and oversold wanting volatility to spike from current levels but volatility is the most unreliable instrument to chart. Volatility can be setup to bounce but it will always surprise you so take technical analysis with a grain of salt when assessing volatility such as the OVX oil volatility or the general market volatility with VIX. The deadly volatility ETF's should never be traded at anytime. Volatility ETF's are criminal enterprises. The OVX may spike wildly higher due to the possie d from the histogram and stochastics, however, the OVX will likely retreat again, on this weekly basis, to honor the weak and bleak RSI, MACD and ROC.
The upper standard deviation band was violated but price did not quite yet touch the 20 MA. It came close and it should show it more respect at 50.58.
Keystone has no position in oil right now but would look at the short side not the long side for a play on black gold. But you will also need to be nimble and if you have profits in oil going either way do not be shy to take them. The news bites are going to push oil prices to and fro. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.