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The recent dip in crude oil has brought the commodity back to the lower end of its mult-year upward trending channel. This together with an oversold reading in the RSI-indicator leads us to believe that crude has seen most of its downside and is likely to turn (sharply) higher in the short run. We are looking for a pullback toward the $70 area, possibly new highs in due term.

The argument for a weak oil price (slowing economic growth, diminished geopolitical tensions) are now too wide spread in our view and therefore demand a contrarian approach. We’re picking up some contract around these levels and add on to our long gold position (see last week’s trade idea)

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This entry was posted on Monday, September 18th, 2006 at 21:13 and is filed under Thoughts from the Floor.