Crude: The newest bear market

Crude oil in a new bear market? 
The newest bear market is in crude oil. The definition of a bear market is when an ‘asset class’ is down more than 20% from its recent high: (Bear Market Rally Definition Investopedia). It has been more than five years since the market fell so hard so fast from its’ high. Two months later, it was even lower. During the past 20 years, the SPX has struggled when oil fell into a bear market.

Oil prices broke to a fresh seven-month low on June 21, with WTI crude oil dropping to $42 per barrel. The renewed and heightened pessimism over the pace of rebalancing has sunk in as OPEC, is struggling to reduce its’ inventory. U.S. shale continues to grow production. There are large volumes of supply back in the market at the worst possible time.

WTI crude oil now technically bearish

Most oil companies are now adjusting to “lower for longer.”

The Wall Street Journal reports that “most in the oil industry are resigned to low prices for years to come, recognizing that a range of $50 to $60 might be a semi-permanent equilibrium.”

Between 2014 and 2015, 105 oil producers and 120 oilfield service companies went through bankruptcy. 

Conclusion
In short, these extreme price movements and key support levels can provide some fantastic opportunities to trade oil like my last trade in SCO for a 21% move a couple weeks ago.

 

About the Author

Founder of AlgoTrades Systems., internationally recognized market technical analyst and trader. Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. He is responsible for market research and trade alerts for of its newsletter publication. He is the author of “Technical Trading Mastery – 7 Steps To Win With Logic” and has  been featured in Futures Magazine, Gold-Eagle, Safe Haven, The Street, Kitco and dozens of other financial websites. You can follow him on Twitter @TheTechTraders.