Oil is Not Just Oil
- Posted by Greg Harmon
- on April 24th, 2013
All Crude Oil is not alike. Crude Traders understand this but many others do not. The two major types Brent North Sea Crude and West Texas Intermediate Crude are the most important. And their relationship to each other is very important. For stock traders the ratio of the United States Brent Oil Fund, $BNO, to the United States Oil Fund, $USO, offers a way to follow the relationship. And looking at the daily chart there is a trade opportunity building right now.
There are 3 indicators that come together that make this ratio interesting. The Relative Strength Index (RSI) has bottomed and is turning up. The Moving Average Convergence Divergence indicator(MACD) has also bottomed and is turning up on the signal line with a cross to trigger. And the Price has bottomed. The previous 4 times, as noted above, that these have lined up this has led to $BNO outperforming $USO. The average out performance has been 11%. This represents a move back to the 2.61 ratio. Use 240 shares short of $USO for every 100 shares long of $BNO, to trade this move and a stop near a ratio of 2.33.
Join the Dragonfly Capital Views Premium Membership
Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through April 2013 Expiry and sign up here.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
- SPY Trends and Influencers December 20, 2014
- Macro Week in Review/Preview December 19, 2014
- Dragonfly Capital Views Performance Through December 2014 Expiry
- Charting An S&P 500 March Higher
- Premium Stuff
- Benzinga Morning Prep from December 18, 2014
- Getting a Rise in Dick’s for the Holidays
- Premium Earnings 12-18-14
- Checking Back on Crude Oil
- Time to Hook Up with PC Connection