Where Oil Is Most Likely To Go After This Volatile Pullback!

Oil has tanked recently. But here's where it likely goes from here.

My long-time subscribers know that I've had very strong long-term opinions on oil. When it was at $140 or $114 per barrel, I knew it was overdone to the upside and would likely correct severely lower and when oil was at $26-$30's, I believed that oil had gotten overdone to the downside. In those moments, my long-time subscribers will remember me saying that it would eventually retun to more of a balanced price in the $75-$90 per barrel area, minimally. Well, we've hit the low side of that target.

Where did I get that from? Oil trades to extremes and the truth about what it should trade at is usually somewhere in the middle of the range. Close to %150 is WAY overdone to the upside and 26 to the downside is WAY overdone to the downside. The truth of its value tends to be more in the middle of its 10-year range, which is also where important/significant supports/resistances lie as well. See the chart below.

Recently, you'll remember me warning you about a very likely "stiff" correction coming in oil due to it getting very far stretched above its weekly moving averages. That caught the media by surprise, but it didn't catch my subscribers by surprise because you heard me warn about it on weekly videos and in our conversations on the site. It's why I urged the selling of BP, TOT and CEO if you still owned them. Well, now, oil has gotten slammed in the near-term (which is not uncommon for volatile oil). It could trade near, at or below its 200-week moving average but there's a huge chance that it resumes its long-term uptrend after that. It likely takes another stab at its former highs and is very likely to even make new multi-year highs.

What tipped me off to the correction we're seeing now? The distance between oil's price and its 200-week moving average (emphasized by arrows), its declining RSI and MACD and the media's infatuation with oil's rise (overly bullish sentiment).

Now, the sentiment in oil is getting extremely bearish simply because it's had a volatile percentage pullback (which is not uncommon to oil). Now it's getting closer to its rising 200-week moving average and is closer to a healthier level once again. Could it drop more near-term? Sure. No one knows where it "exactly" stops.

But is its uptrend like to resume. Sure! It will likely make a run at its old highs, and potentially even surpass them to continue on its uptrend. What would cause it to only reach its old highs or fall short of them? A reversal in the economy. So I'm watching oil closely. There's no doubt the next recession and stock market downturn is coming. In fact, we're probably in the stock market's next downtrend right now (even though it's too early to confirm that just yet). But with the stock market (as measured by the S&P 500) trading comfortably below its 200-moving average, there's a huge chance the market is turning negative/downward.

Subscribers are ready for any downturn, flush with cash and ready to average down on solid stocks and huge/extreme values in the stock market, when they come. Not in-the-know with my Logical Investors? Come join us! www.seanhyman.com and click on the Premium Newsletters tab and click on any article/video, scroll down and hit the sign-up button.

God bless!

Comments (13)
No. 1-5
pwoods814
pwoods814

Sean, thank you for the article. However, the chart is not visible. I copied the information in my address bar, but I didn't get the chart.

SKCaBkr
SKCaBkr

Hi Sean, when you refer to oil likely making a run to its old highs, do you mean its recent high of 76.90 or its former highs in the 110-114 a few years ago? Thanks

jamesA
jamesA

Hi Sean, referencing your chart above, and trying to identify the wave counts, would you agree that oil hit the low point in early 2016 ($26.05) and began a 5-wave uptrend. The current pull-back is likely wave 4, and when that concludes we're looking at the last leg (wave 5).

If true, then wouldn't it be wise to wait for oil's wave 5 to help our old UWR picks (DO, RIG, DVN primarily) reach their best possible point and then sell them wherever they're at, knowing that it's already been 5 years or more in these stocks, and it's time to cut our losses, because if we don't we'll likely see another large a-b-c downtrend that will drive those holdings further into the red for years to come?

I ask questions like these because it's how I learn. I expect you'll have additional perspective on this. :) Thanks so much for your insight.

jwolfescrf
jwolfescrf

Sean, I liked your story on oil. I assume that you still prefer gold at this time rather than buying into a company that would profit from rising oil prices? I think you have said previously that gold will benefit as oil prices rise, but wondering also about an oil play. thanks as always!