Crude Oil Has Strong Support at $40 ~ market folly

Monday, December 8, 2008

Crude Oil Has Strong Support at $40

As the excellent chart from Barry Ritholtz's blog points out, Crude Oil has a ton of support at $40, both technically and fundamentally. We look at it as a make or break point really. Support at $40 could setup a snapback trade which would establish a new range for crude to trade in. However, it breaks $40 to the downside, look out below. You can play the price of crude oil without having to be in commodities markets. The ETFs for your consideration are USO, DBO, OIL, and DXO (leveraged double-long) among others.

Treat it as a technical trade, or treat it as a long-term believer in peak-oil theory. Either way, oil is becoming very compelling at these levels. Just keep in mind that price action that overshoots expectations (i.e. oil > $140), can also overshoot to the downside.

(click to enlarge)

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