Jeff Clark's Market Minute

The Pre-Holiday Oil Trade

Oil is crashing.

The price of the gooey black stuff has fallen 12% over the past week. It’s down 21% from its April high.

This action has lots of the talking heads on the financial news networks declaring that oil is now in a bear market. They’re looking for lower prices. One prominent analyst said yesterday that he expects a barrel of West Texas Intermediate Crude (WTIC) to trade as low as $40 over the next few weeks.

Don’t count on it.

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It’s summertime. Independence Day is less than one month away. And, as any brave soul who has ever rented an RV to take his family on a cross-country road trip during the summer can tell you, oil prices tend to rise going into the Fourth of July.

So, the typical post-Memorial Day selloff in crude oil gives astute traders a chance to buy in anticipation of the typical pre-Independence Day rally.

The strategy sure worked well last year. Take a look at how the United States Oil Fund (USO) – an exchange-traded fund that tracks the price of oil – behaved last summer

Traders could have purchased USO in early June for about $13.20 share. It was trading above $15 by the end of the month. That’s a 13% gain in just over three weeks.

It looks to me like oil is setting up for a similar move this year. Here’s the current, six-month chart of USO…

Following the typical post-Memorial Day decline, USO is now quite oversold. The MACD and RSI momentum indicators are more oversold than at any time since last December – just before USO bottomed and then rallied 19% in about two weeks.

It’s hard to imagine a big decline from here, with the technical indicators in such an oversold condition. And, with Independence Day less than one month away, aggressive traders should probably use any short-term weakness in the price of oil as a chance to buy.

The price of oil should be higher three weeks from now than where it is today.

Best regards and good trading,

Jeff Clark

Reader Mailbag

In today’s mailbag, Jeff Clark Trader subscribers thank Jeff for profits on a recent trade…

I just joined Jeff Clark Trader last month, with a lifetime subscription. Today, I closed out the call option you recommended for a 150% gain in less than three weeks.

I was able to get in a $0.60 and sold for $1.50. I started small. One more trade like this I will have paid for my lifetime subscription. Thanks, and keep up the great work!

– Thomas

I bought four contracts at $283.61 and sold half my position today at $324.00. That is the first time I made a profit in a long time. Thank you, Jeff. If this continues, I will be able to make even better profits soon.

– Paul

Great… got in at $0.49 and sold half. That’s better than 100%… waiting on the second half now… I like your way of thinking. Everything is in the detail and you’re a good man. Pay attention, everybody.

– John

How do you plan on trading oil? What other sectors are you following?

Let us know, along with any other trading questions, suggestions, or stories at [email protected].

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Jeff Clark's Market Minute Archives

Jeff’s intuitive feel for short term market swings and his strong protective discipline have allowed me to lock in thousands of dollars in gains where I might otherwise have just ridden the markets up and down .”  -Chris, a reader and “seasoned investment advisor” from Seattle

Jeff -- your picks and analysis have been nothing short of amazing. I have traded the market for many years but I must admit, I have NEVER seen something this good.” - Mike H.

In only 2 weeks of using the service I’ve booked over $10K in profits. Needless to say I’ve paid for my membership.” - Tony J.

I started following Delta Direct about 3 weeks ago… I bought a small investment from one afternoon to the next morning. About 11AM I got out and made 8K in less than 24 hours.” – D. Tilghman