CRUDE bear break and key levels
Updated
Thanks for viewing,
This post is partly to show off and partly to share my view on what comes next;
TRADE: Fortunately I traded short on crude starting on the 4th of Feb at $50.46 - why? Because, based on my Elliot Wave count we we in wave B that would be a revisit of the corrective drop that ended at $26.05 in Feb 2016. But also because this view was reinforced strongly by the steep straight-line drop in crude between early October and late Dec 2018 - I felt that it was so strong that that drop was only part of a similar scale drop that would happen at some point in the future when conditions aligned (EW has ingrained in me that corrections come in 3 waves generally) and the drop was likely to end around the $26.05 level. My original target (blue box) was simply based on a 1:1 extension of the 2018 drop.
Waiting is difficult - probably more so when you have strong conviction. I had a few false starts along the way, but my view was borne out (albiet the drop was quicker than I had expected) and I closed on the 9th of March at $28.54 for a 44% gain (just over 10x on my trading platform - my largest ever trade biggest % gain) and. I entered on a break below the local low, secure in the knowledge that the local high in Jan 2020 - even due to cruise missile strikes on crude infrastructure in the Middle East - ended up being lower than the April 2019 high. I didn't enter before that, although I was often tempted, and my view on the risk of unanticipated events was still mixed. I had also been following the Cerveca Sickeness very closely, with very good daily updates from Peak Prosperity on YT. Because of its virulence, and increasingly high likelihood of causing increasing economic disruption and significantly lower crude demand (among other things). There was a very strong case for a price decline in crude. However, I may have still entered a little early.
However, no trade goes perfectly and I still had to remind myself many times what the thesis was - especially because on my platform the stop loss cancels every 24 hours and I was on the wrong side of the trade for some time. I was also comforted by my view that OPEC didn't have the market share it once did they had a very tough choice to make 1. Either cut production to make more % on less production (likely less income), or 2. Don't cut and make less % on the same production (less income). I even knew that Russia was prepared for $25 oil, but thought that even though $25 oil was probable, that they would likely try to delay that happening. Then just before the markets closed on the 6th I heard that Saudi Arabia was actually increasing supply and cutting prices (unfortunately I didn't add to my position - which was already well in profit). They are causing self-inflicted short-term pain (they hope) in order to cause greater pain in higher cost producers. Unexpected but welcome, although I am a little fearful of the economic and debt market consequences that will ripple through the economy.
NEXT: People simply do not want to hear the truth. I really don't think many people yet grasp the full likely impact on economic activity coming. It will shock many. Today I was shocked by the level of unpreparedness of healthcare facilities in the US who cannot even supply Doctors with masks as well as from hearing that Italian Drs are overwhelmed and are having to make hard triage decisions. When was the last time in your lifetime - outside of a war setting - that doctors were deciding who they can help and who will die on a scale of hundreds or thousands of people?
Italy is not the last country that will have to institute such a ban to control this outbreak (that even today people are still comparing to the seasonal flu). Think significant reductions in air travel, large reductions of sea-freight, cars, trucks, busses, trains. Korean Air has cut 80% of capacity, Cathay are switching to cargo flights and has sent a large portion of staff home without pay, Qantas has grounded multiple aircraft but will continue to pay staff (at least until late June anyway), Virgin Air is flying empty planes to avoid losing etc etc Long long story short I am looking to re-enter short on a break below. Because of just how this will kill demand for oil - prices may well go below $26.08. I will update with a shorter-term view on how I will enter.
I don't want any of this to happen and it is very hard to see. Its also hard to see the level of denial and official incompetence - I really thought the WHO was there to help, that governments were a little more on the ball. I am just trying to find ways to add to my funds, adding to gold and silver holdings, so me and my family do as well as we can when the dust settles. Anyone that doesn't give Elliot Wave the time of day, needs to read a little more about it (EW + fundamental analysis = gold).
This post is partly to show off and partly to share my view on what comes next;
TRADE: Fortunately I traded short on crude starting on the 4th of Feb at $50.46 - why? Because, based on my Elliot Wave count we we in wave B that would be a revisit of the corrective drop that ended at $26.05 in Feb 2016. But also because this view was reinforced strongly by the steep straight-line drop in crude between early October and late Dec 2018 - I felt that it was so strong that that drop was only part of a similar scale drop that would happen at some point in the future when conditions aligned (EW has ingrained in me that corrections come in 3 waves generally) and the drop was likely to end around the $26.05 level. My original target (blue box) was simply based on a 1:1 extension of the 2018 drop.
Waiting is difficult - probably more so when you have strong conviction. I had a few false starts along the way, but my view was borne out (albiet the drop was quicker than I had expected) and I closed on the 9th of March at $28.54 for a 44% gain (just over 10x on my trading platform - my largest ever trade biggest % gain) and. I entered on a break below the local low, secure in the knowledge that the local high in Jan 2020 - even due to cruise missile strikes on crude infrastructure in the Middle East - ended up being lower than the April 2019 high. I didn't enter before that, although I was often tempted, and my view on the risk of unanticipated events was still mixed. I had also been following the Cerveca Sickeness very closely, with very good daily updates from Peak Prosperity on YT. Because of its virulence, and increasingly high likelihood of causing increasing economic disruption and significantly lower crude demand (among other things). There was a very strong case for a price decline in crude. However, I may have still entered a little early.
However, no trade goes perfectly and I still had to remind myself many times what the thesis was - especially because on my platform the stop loss cancels every 24 hours and I was on the wrong side of the trade for some time. I was also comforted by my view that OPEC didn't have the market share it once did they had a very tough choice to make 1. Either cut production to make more % on less production (likely less income), or 2. Don't cut and make less % on the same production (less income). I even knew that Russia was prepared for $25 oil, but thought that even though $25 oil was probable, that they would likely try to delay that happening. Then just before the markets closed on the 6th I heard that Saudi Arabia was actually increasing supply and cutting prices (unfortunately I didn't add to my position - which was already well in profit). They are causing self-inflicted short-term pain (they hope) in order to cause greater pain in higher cost producers. Unexpected but welcome, although I am a little fearful of the economic and debt market consequences that will ripple through the economy.
NEXT: People simply do not want to hear the truth. I really don't think many people yet grasp the full likely impact on economic activity coming. It will shock many. Today I was shocked by the level of unpreparedness of healthcare facilities in the US who cannot even supply Doctors with masks as well as from hearing that Italian Drs are overwhelmed and are having to make hard triage decisions. When was the last time in your lifetime - outside of a war setting - that doctors were deciding who they can help and who will die on a scale of hundreds or thousands of people?
Italy is not the last country that will have to institute such a ban to control this outbreak (that even today people are still comparing to the seasonal flu). Think significant reductions in air travel, large reductions of sea-freight, cars, trucks, busses, trains. Korean Air has cut 80% of capacity, Cathay are switching to cargo flights and has sent a large portion of staff home without pay, Qantas has grounded multiple aircraft but will continue to pay staff (at least until late June anyway), Virgin Air is flying empty planes to avoid losing etc etc Long long story short I am looking to re-enter short on a break below. Because of just how this will kill demand for oil - prices may well go below $26.08. I will update with a shorter-term view on how I will enter.
I don't want any of this to happen and it is very hard to see. Its also hard to see the level of denial and official incompetence - I really thought the WHO was there to help, that governments were a little more on the ball. I am just trying to find ways to add to my funds, adding to gold and silver holdings, so me and my family do as well as we can when the dust settles. Anyone that doesn't give Elliot Wave the time of day, needs to read a little more about it (EW + fundamental analysis = gold).
Note
Not much point in doing any more "after-the-fact" publications. I re-entered short on a break below the swing low at 27.34 and closed way too early at 24.42 (11% move). Still gained 150%+ on the (small position only) trade size. Happy with that, So far this month my account was up 270% before I withdrew funds (BY FAR best month ever - I guess I am a bear - let's face it there was no bullish scenario). Call me paranoid but now I am going to cash because the markets might close, there may be some failures in brokerages (nil research done but look everything is on the table).
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