I’ve been bullish on oil now for almost a year. It’s one of the most contrarian positions I’ve ever taken…and it hasn’t been easy.
Last April, conditions looked good for oil to move higher in spite of the media suggesting otherwise. The price of West Texas Intermediate crude oil had moved from below $27 per barrel to the lower $40 level.
Today, sentiment remains strong for lower oil prices as seen in this headline from TheStreet.com:
“Oil’s Air Strike Spike Could Lead to Longer-Term Lower Prices”
In spite of negative sentiment, the case for higher oil prices remains strong.
Crude oil has crossed back above the $50 level after a 12% drop that began the last week in February. It held a very strong support level near $49 and has bounced higher.
During the move higher that began in early 2016, oil has touched the mid–$50 level 4 times and has yet to break above $55. This break above $55 could come soon.
There are three compelling reasons that the price of oil can continue higher.
First, the Stock State Indicator condition of crude oil is in the Green Zone and has been since the last week of October.
Second, the volatility of crude oil is increasing. In the past, this increase in volatility has led to higher prices over a long period of time.
And finally, my long–term time–cycle forecast is showing that oil has bottomed and is due for a multi–year climb higher.
I’m bullish on oil. It’s a good time to remind us all though, that unlike the case with gold, when it comes to oil, it’s the commodity itself that is the most volatile while the oil companies are less volatile. If you need a refresher on that point you can find it here.
Listening to the signal, not the noise,
Richard Smith, PhD
CEO & Founder, TradeStops