• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Energy

Why Oil Prices Are Due for a Bounce

OPEC is grabbing at the proverbial straws in an attempt to regain control of the global oil markets.
By CARLEY GARNER
Dec 01, 2018 | 03:00 PM EST

The Thanksgiving holiday and crude oil prices have not been friendly to one another over the years. Some of the most challenging energy markets have occurred as the majority of Americans were sitting down at a table with family to enjoy a turkey dinner. The general public isn't aware of the fact that commodity futures markets rarely close, not even for Thanksgiving.

The futures markets, including commodities such as crude oil, natural gas, gold, and others, generally trade in an overnight session on the Wednesday evening prior to the fourth Thursday in November. The futures continue to trade on Thanksgiving morning as they normally would and close a moderately abbreviated session at noon Central Time. In other words, for all intents and purposes, the commodity markets are open on Turkey Day.

In some ways, this is nice because it gives traders the ability to react to global news on a holiday. However, in many scenarios it is a curse; low trading volumes often lead to exaggerated price moves and, in many cases, unmanageable volatility and risk. Even worse, once you take volatility out of the jar it is difficult to put it back inside.

I'll never forget the Thanksgiving Day in 2014. I boarded a plane to Chicago on an early morning flight (before dawn) out of Las Vegas because the airfare was dramatically cheaper to fly on Thanksgiving than it was to fly on the Wednesday before. It seemed like a savvy move because I would still arrive in the Windy City early enough to enjoy the holiday with friends and family. Yet, I had completely underestimated the ability for commodity market volatility on what should have been a quiet and relaxing day of thanks.

Several of our brokerage clients, and I, had option positions in which there was downside risk exposure. The trades were constructed in a manner that allowed for some price weakness without causing an issue, but a high volatility dramatic move would leave the positions vulnerable. Prior to boarding the plane, I noticed crude oil prices were down $2.00 to $3.00. This was concerning, but not out of the ordinary and completely manageable. However, by the time the plane landed the market was closed and, if I recall correctly, down roughly $8.00 per barrel (in a single abbreviated trading session). Needless to say, it ruined my Thanksgiving.

The 2018 Turkey Day volatility felt dramatic, but it paled in comparison to 2014. Nevertheless, trading in the energy market during this time of year is substantially riskier than doing so during more normal and liquid conditions. Any commodity trades spanning from mid-November through early January should be employed on a minimal scale and with a meaningful hedge; I've learned this hard lesson more than I care to admit.

Having said that, any decision you make that might, or might not, be influenced by any of the things I have to say should stay within the theme of conservation of capital, not swinging for the fence.

OPEC is grabbing at the proverbial straws in an attempt to regain control of the global oil markets. It is clear by now to most that U.S. shale has dramatically impaired the influence OPEC has on the market, but that doesn't stop crude oil speculators from reacting to OPEC headlines in the short-run. The upcoming December meeting on December 6 is expected to be accompanied by a production cut to the tune of 1 to 1.5 million barrels per day. The going assumption is that cratering prices leave OPEC with no choice but to try to stabilize pricing. Anticipating of such ahead of the meeting could support prices in the coming sessions and possibly into mid-December as the reality of the news is digested.

Technical oscillators on a weekly crude oil chart have finally dipped into oversold territory. The RSI and Slow Stochastics are both suggesting the selloff could be a little overdone. Further, there is a relatively high probability of a sharp bounce. Although the trendline near $51.00 has been temporarily breached on a few occasions, in our eyes it is holding. Remember, technical analysis is an art, not a science. Relying on and reacting to precise figures isn't practical. Aside from stop-loss running and the flushing out of the weak players the market is seeing buyers come in on dips, and that is how bounces start.

If this area of support continues to hold, as we suspect, a move toward $61.00 could be in the cards. $61.00 marks the area in which the previously broken uptrend line would then become resistance...and a likely target for a corrective rebound.

Keep in mind, seasonal tendencies remain overall bearish through January and part of February. Thus, the long-term bulls are not out of the woods on a possible test of $42.00. If a potential December bounce eventually fails to break above $61.00ish, another round of selling could commence.

This commentary originally appeared on Real Money Pro on Nov. 29. Click here to learn about this dynamic market information service for active traders.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication Garner had no position in the securities discussed.

TAGS: Investing | Energy

More from Energy

Here's How Investors Can Get in on Soaring Uranium Prices

Bruce Kamich
Jun 1, 2023 12:33 PM EDT

The charts of this fund are giving off a positive glow.

It's a Long Shot, but Here's My Ideal Scenario to Keep the Fed in Check

Bob Byrne
May 30, 2023 7:15 AM EDT

It involves people pocketing their savings from lower gasoline prices so that the economy cools and the Fed doesn't need to raise rates again.

3 High-Yield International Oil & Gas Majors

Bob Ciura
May 27, 2023 7:15 AM EDT

The top global energy names are returning more cash to shareholders through dividends and share repurchases.

CorEnergy Takes Important Step in Deleveraging

Jim Collins
May 25, 2023 1:15 PM EDT

However, the preferreds are no longer 'money good.' So a completely new 'distressed company' calculus has taken over.

Chevron: Drilling Down on the Charts

Bruce Kamich
May 23, 2023 2:18 PM EDT

Here's where aggressive traders could probe.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 01:51 PM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Adjusting Your Trading Approach to Shifting Market...
  • 06:54 PM EDT CHRIS VERSACE

    AAP Podcast: A Tongue -- and a Market -- Twister: 'Get a Debt Deal Done'

    Listen in as the Action Alerts PLUS Podcast tackle...
  • 12:07 PM EDT STEPHEN GUILFOYLE

    Selling Some of This Surging AI-Related Stock

    This isn't the only name in the Stocks Under $10 p...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login