Where Will Oil Head Next?

16.02.2017 • Gold and Natural Resources

Nick O’Connor – Capital and Conflict (Great Britain) –

After jumping north of $50 following Opec’s decision to limit supply at the backend of 2016, the oil price this year has been largely “range-bound”.

Wow! Thank you to everyone who joined me live last night as part of “Project 10-X”. It was a great event with a huge audience (and from all over the world). Fantastic.

Perhaps you didn’t, and you’re thinking, “I wish he’d shut up about this tech malarkey”. If that’s you, you’re in luck. I will shut up about it. Though I wouldn’t have banged on about it in the first place if I didn’t consider it worth your time.

But not everyone is a tech enthusiast. And not everyone wants to take big risks with their money shooting for 10–X returns. As I said at the start of the week, my goal in 2017 is to present you with quality investment research that helps solve real problems you have.

Like the “income famine” we’ve seen since 2009. Low interest rates have clobbered income seekers for close to a decade. Perhaps that’s your biggest problem. If so, look out for my note next week. I think I may have found the answer!

Or maybe you’re interested in trading – learning to understand and anticipate how a share, index, commodity or currency will break out higher. If that’s the case, I also have good news. I’ll tell you more next week.

In the meantime, let’s turn our attention to oil. It’s a great “teachable example” of how to understand the mysterious (but understandable) forces behind a market.

After jumping north of $50 following Opec’s decision to limit supply at the backend of 2016, the oil price this year has been largely “range-bound”.

That’s a term that’s vital to Eoin Treacy’s trading strategy. A range develops when there’s no strong reason for prices to rise or fall – so they drift sideways instead. Right now, oil is ranging between $50 and $55.

Ranges can last a long time. They’re a kind of psychological malaise in which expectations and interest deteriorate. But as Eoin constantly tells me, ranges are explosions waiting to happen. When a range breaks out – either up or down – the move can be extreme. Understanding how and why that happens can be extremely profitable. It comes down to behavioural psychology.

Ranges don’t break out by accident. Oil won’t suddenly jump to $60 or $45 without good reason. That means a compelling psychological story or rationale for prices to move sharply up or down, catalysed by an event which triggers the move.

The market is just made up of people after all. People aren’t rational. We often act on instinct and psychological bias. The market is the same. It needs a story to tell itself to justify higher (or lower) prices. Then it needs a trigger – a kick up the arse, frankly – to lend urgency to that story.

This week Eoin has been applying his ideas to the oil market. You can read his full analysis below (by the way, access to Eoin’s trading ideas and alerts usually costs more than £1,000 ).

I’ll hand you over to Eoin now.

Best,

Nick O’Connor
Associate Publisher, Capital & Conflict

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