An Interesting Setup in Oil

A few days ago while driving to work I noticed the price of gas was $2.97/gallon and then while driving home the price had risen to $3.55/gallon. A 58 cent increase in under 12 hours. You have to love commodities!

The chart we are going to look at this morning is light crude oil. First lets look at the ultimate oscillator, which measures buying pressure based on three-weighted time periods. As you can see with the blue circles, since early 2010, whenever the ultimate osc. breaks above 70 we typically see crude either drop or consolidate. The price of crude oil is also back to the previous low set in December, which could act as resistance.

Oil has risen nearly 20% from its June low, but that doesn’t mean it couldn’t continue its trek back to $100/gallon. It’s often best to not try to front-run moves like this, allow price to confirm what we are seeing here. It’d be nice to see some short-term weakness before retesting its current price while allowing a negative divergence to be created with the ultimate osc. in order to confirm our thinking….time shall tell.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.