Island Reversal forming on the OIH

The price action over the last two days has been a little extreme, to say the least; the hedge fund theory looks good, and I have a few of my own, most which assume manipulation for one reaon or another" and also assume a move higher once the shakeout is over. This one is painful !

Oil companies (at least the one I work at) say the sweet spot for oil is 55 bucks, and the new congress has it out for the subsidies. Is it possible prices are manipulated to help big oil ?

Low oil traditionally inspires the overall market, which one could say is getting a bit stretched, going up pretty quickly, and maybe oil was dropped to "inspire" further record market highs

It seems like many upward moves are preceded by a shakeout to blow stops. I can buy the fact that the traders watch the weather outside while ignoring blizzards for two weeks in a row that shut down a major airport and travel hub...unless it suits their purpose. Now, instead of "cold weather in midwest raises oil prices" we get reduced travel demand lowers oil prices.

Last theory is that we are trying to "torture" OPEC with news of oversupply, and by setting prces low, they won't want to cut production because it will cut income, and they will have to drive their Mercedes 50,00 miles instead of buying a new one at the first oil change.

I'm betting OPEC will take some action, and when everybody has some nice positions established in the energy industry, we'll see the traditional Nigerian Attack news and anticipated summer driving demand news starting to creep in. I can't think of a single time in the last few years that low Oil has not been a buying opportunity. BTW... the guy that heads up our Nigerian ops says there is violence there every day, and for some reason it's not being reported at the moment.



Quote from rjv27:

This is not new information. I already heard this news on my squak boxs this afternoon. They said a huge hedge fund has a margin call that needs to be meet in the next 24hrs.

I do think there will be a nice bounce in the near future, may be tomorrow. I'll be looking out for it.
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This has to be more related to the fed minutes. With the thought of slowing growth in the US, demand for distillates will decrease. My family is in construction in Vegas and there are no new projects being started, no mass grading. That spells, no demand for diesel. Put 2 and 2 together, oil is suffering.

So, one fund starts selling, the others get wind and all of a sudden everyone's selling, guys like amarinth on full margin have to clear out their positions. So this sell off may continue especially if there's another hedge fund blowup.
 
Quote from a529612:

Boone Pickens expects average $70 oil in 2007. Would you bet against him?
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umm.....gee. Could it be that he was busy selling while talking up his book. Oh no! how immoral!

A few more "down grades" and it'll be time to buy. It's called Churn and Burn the little guy. Rinse and repeat ad infinitum. :D

<a href="http://imageshack.us"><img src="http://img363.imageshack.us/img363/6938/sallabigscamjn3.gif" border="0" alt="Image Hosted by ImageShack.us" /></a>

http://elitetrader.com/vb/showthread.php?s=&postid=1213228&highlight=bsmeter+crude#post1213228


By the way, there's a new paradigm. Lower crude prices won't translate to lower gasoline prices.
 
I wouldn't try to pick the bottom, might get cut by the falling knife. Wait for the confirmation of a trend reversal.
 
http://blogs.wsj.com/marketbeat/2007/01/04/crude-not-so-sweet/ has an interesting take on this.

Darin Newsom, senior commodities analyst at DTN in Omaha, Neb., says the decline points to a condition that existed for most of 2005 and 2006 — that of the later-dated futures contracts costing more than the current futures contracts, which suggests the market is flush with supply.

This condition, known as “contango,” means refiners and other market participants are buying and holding oil to sell it down the road, and that they’re not worried about current supply. It means it wasn’t the oil industry driving crude higher — it was investors and speculators, who are now selling. This lines up with data from the Commodity Futures Trading Commission, which shows that while non-commercial traders (funds and other investors) held long positions in oil all throughout 2006, commercial traders — people actually involved in the industry — have been short on a weekly basis going back to May 2005. “It was a house of cards — there’s a huge amount of investment money in it,” Mr. Newsom says.
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Here we go...in a few days, this is going to appear as the classic Island reversal on the charts. Im holding my breath on this call.

If oil was to fail 55 dollar support, then its going to $33. Im not kidding...

BTW, OPEC lied. Tanker count demonstrates that they are not making good on the cuts.
 
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