The last time we looked at oil, we figured the price of the gooey black stuff was headed for a big move. We just weren’t too sure of whether the move would be higher or lower.

As it turned out, it went both ways.

Look at this updated chart of West Texas Intermediate Crude (WTIC) we first showed you about one month ago…

Now, oil is approaching the downside target of the triangle pattern, near $51 per barrel (the bottom red line). That has been the support level for the past few months. So, we now have another opportunity for a low-risk trade in oil.

You see… commodity prices tend to stick within a well-defined trading range for long periods of time. So, in the world of commodities trading, the rule is to buy support and to sell resistance. And, you just keep doing that, over and over again, until it doesn’t work anymore.

For the past several months, oil has been stuck trading between about $51 per barrel and $60 per barrel. Traders could have done pretty well just simply buying oil whenever it dipped down towards $51 and then selling it whenever it popped up to $60.

Well… all of a sudden, the price of oil is drifting back down to its support line near $51. So, traders can look to buy oil here at about $52 per barrel in anticipation of a bounce back up to the top of the trading range.

If oil breaks support and starts to trend lower, traders can exit the position on a move below $50 or so and keep the loss relatively small. And, if oil holds support and bounces higher from here, then traders can look to take profits as it approaches the upper end of its trading range near $60.

At the current price of about $52 per barrel for oil, traders are risking $2 for the chance to make $8. That seems like a pretty good risk/reward setup to me.

Best regards and good trading,

Jeff Clark

P.S. Lately I’ve been working on something big… and different.

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For a long time, options were the best way I knew of to magnify my profit potential when trading – and to help you do the same.

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Reader Mailbag

Today in the mailbag, a new Delta Report subscriber shares some feedback…

First, I love your service! I’ve experienced many more winners versus losers!

I personally like the fact that you don’t make a recommendation for the sake of simply making a recommendation. You make a recommendation only if you feel there’s a very good percentage it will be a winner.

– Garth

Jeff often refers to the McClellan Oscillators. Where can I find this on StockCharts? Is there a ticker symbol?

– James

Mike’s note: Thanks for your question, James. And thank for you being a subscriber.

For those who aren’t aware, the McClellan Oscillators are a technical indicator, but not in the same sense as the MACD, RSI, or exponential moving average. They’re used as a broad-based measure of the number of stocks in an index advancing, against the ones declining, and the momentum of that trend. That’s what makes it different from the much simpler advance-decline line.

On StockCharts.com, you can find the McClellan Oscillators for the NYSE under the symbol “NYMO”, and for the Nasdaq under the symbol “NAMO”. Those are the two main charts that Jeff watches when using this indicator. But it can be applied to any index or group of stocks.

Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].