I'm very much in the camp that oil could fall further, but not much in the short term, and the chances of a significant short squeeze is very high. The charts have been littered with them over the last 12 months and this could be the biggest of all with that big red weekly candle. Smells of short term capitulation to me. I do however doubt the final low is in, so this is purely a swing trade for me.
In terms of finding a bottom I don't think we're too far away. The US shalers economic sweet spot seems to be between $40-60 (post the huge cost rationalisation that has taken place). IE: below $40 many shut up shop, above $60 many more can turn on the taps. As a general rule, if it falls significantly below, I want to be long and significantly over, short.. unless fundamentals change of course.
The 2 key "new" factors that should drive the price in the medium term is 1. Iran - significant increase in global supply due to lifting of restrictions under the nuclear deal. 2. expiration of hedges- Many are expiring at the end of this year so there will be a lot of supply that is no longer economic. Which factor will have the bigger impact on the supply side is impossible to forecast, but I favour Iran, hence the swing trade mentality.
I took a moderate position in DLS yesterday after it pulled back. As well as a smaller position in STO and a few sheckles in SEA. DLS has been my favoured oiler for some time. STO you made a compelling case earlier, and SEA as I think they could multi bag from here without too much trouble.
As we've discussed before I also want exposure prior to the FOMC, but I'm far from all in. There will certainly be time to jump on, but of course the steep gains will be made by those prepared to roll the dice. Similar scenario for the golds, but I think there is more risk to the downside, so took some off the table today. That said I don't think we can judge those trades or charts until after Friday close at the earliest (post rebalance). If POG does not tank tonight I'll be back in heavily into Friday.... Primarily RRL
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