Time to Trade Brent against West Texas Intermediate Crude

About a month ago I wrote that the spread between Brent Crude Oil and West Texas Intermediate Crude Oil was going to $100 (link below). Many of you were probably snickering shortly after that as the spread started to come in. Well today, I stand by my previous call. Look at the updated ratio chart of the United States Brent Oil Fund (ticker: $BNO) against the United States Oil Fund (ticker: $USO) below. After holding in the 1.95 area as I suggested, it is now rising to test the previous high.

As it touches the previous high near 2.09, the technicals are much better looking for a continued move higher. The Relative Strength Index (RSI) is rising but has a lot of room before reaching the previous high at 80. The Moving Average Convergence Divergence (MACD) is just crossing positive. If it breaks over 2.09 this time there is a trade.

Trade Idea: Buy 10 $BNO and sell short 21 $USO with a target of 2.19, with a stop at 2.07

This trade will yield a profit of $36.25 – 37.64 against risk of $7.60, using the closing prices of Friday for the ETF’s and assuming a move to the target. This is a reward to risk ratio of at least 4.77:1.

The Spread Between Brent and WTI is going to $100

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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