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Energy Continues Basing Setup

By Chris VermeulenCommoditiesJan 17, 2020 12:00PM ET
www.investing.com/analysis/energy-continues-basing-setup-200499675
Energy Continues Basing Setup
By Chris Vermeulen   |  Jan 17, 2020 12:00PM ET
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After watching crude oil fall from the $65 ppb level to the $58 ppb level (-10.7%) over the past few weeks, we still believe the energy sector is setting up for another great trade for skilled investors/traders.

We are all keenly aware that Winter is still here and that heating oil demands may continue to push certain energy prices higher. Yet Winter is also a time when people don't travel as much and overall, energy prices tend to weaken throughout Winter.

Over the past 37 years, the historical monthly breakdown for crude oil is as follows:

  • December: Generally lower by -$0.33 to -$0.86. Averages to the downside: -3.65 to +3.08
  • January: Generally lower by -$4.57 to -$6.72. Averages to the downside: -2.68 to +2.27
  • February: Generally higher by +$8.41 to +13.73. Averages to the upside +3.07 to -2.54
  • March: Generally higher by +7.33 to +$15.62. Averages to the upside by +2.84 to -2.14
  • Over the past 25 years, the historical monthly breakdown for natural gas is as follows:

  • December: Generally lower by -$2.34 to -$5.26. Averages to the downside: -0.81 to +0.69
  • January: Generally lower by -$5.14 to -$7.97. Averages to the downside: -0.69 to +0.45
  • February: Generally lower by -$1.48 to -$3.62. Averages to the downside -0.50 to +0.49
  • March: Generally higher by +0.63 to +$1.88. Averages to the upside by +0.41 to -0.70
  • Over the past 35 years, the historical monthly breakdown for Heating Oil is as follows:

  • December: Generally lower by -$0.16 to -$0.37. Averages to the downside: -0.14 to +0.09
  • January: Generally lower by -$0.52 to -$0.96. Averages to the downside: -0.09 to +0.10
  • February: Generally higher by +$0.48 to +$1.06. Averages to the upside +0.11 to -0.08
  • March: Generally higher by +0.03 to +$0.11. Averages to the upside by +0.09 to -0.10
  • This data suggests an extended Winter in the U.S. may prompt further contraction in certain segments of the energy sector that may prompt an exaggerated downside price move in crude oil and natural gas. Heating oil may rise a bit if the cold weather continues well past March/April 2019.

    Conversely, if an early spring sets up in the U.S., then crude oil may begin to base a bit as people begin to traveling more, but heating oil and natural gas may decline as cold weather demands abate.

    Heating oil has almost mirrored crude il in price action recently. Our modeling systems are suggesting that crude oil may attempt to move below $40 ppb. This move would be a result of a number of factors – mostly slowing global demand and a shift to electric vehicles. We authored this research post early in January 2020 – please review it.

    January 8, 2020: IS THE ENERGY SECTOR SETTING UP ANOTHER GREAT ENTRY?

    We believe any price level below $40 in Direxion Daily Energy Bear 3X Shares (NYSE:ERY) is setting up for a very strong basing level going forward. We have identified two “pullback zones”. The first is what we call the “Deep Pullback Zone”. The second is what we call the “Deeper Pullback Zone.” Any upside price move from below $40 to recent upside target levels (above $50) would represent a 25%+ price rotation.

    Daily Direxion Daily Energy Bear 3X Shares
    Daily Direxion Daily Energy Bear 3X Shares

    Historically, February is a very strong month for ERY. The data going back over the past 12 years suggests February produces substantially higher upside price gains (+1899.30 to -394.28) – translating into a 4.8:1 upside price ratio over 12 years. Both January and March reflect overall price weakness in ERY over the past 12 years. Thus, the real opportunity is the setup of the “February price advance”.

    We believe any opportunity to take advantage of this historical technical price pattern is advantageous for skilled traders/investors.

    Weekly Direxion Daily Energy Bear 3X Shares
    Weekly Direxion Daily Energy Bear 3X Shares

    This is a pure technical pattern based on price bar data mining. This is something you may not have ever considered unless you had the tools to search for historical price anomalies and rotation patterns. We have created a suite of tools and price modeling systems we use to help our members find incredible opportunities – this being one of them.

    Get ready, February will likely prompt a very nice rally in ERY if historical price triggers confirm future price activity. The price pattern in February suggests a large upside price move is likely in ERY and we believe these low price basing patterns are an excellent opportunity for skilled traders.

    Energy Continues Basing Setup
     

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    Energy Continues Basing Setup

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    Comments (6)
    Mostafa Amin
    Mostafa Amin Jan 18, 2020 8:06PM ET
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    Oil is Bearish last week may be next week too
    Elin Richards
    Elin Richards Jan 18, 2020 7:25AM ET
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    lol
    Andrew Antoine
    Andrew Antoine Jan 17, 2020 12:37PM ET
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    UWT has Vilume and Cheap. Not ERY.
    Ng trader
    Ng trader Jan 17, 2020 12:34PM ET
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    nonsense
    Avinash Kumar
    Avinash Kumar Jan 17, 2020 12:20PM ET
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    What about Natural Gas , do u see any bullish trend comming in now??
    Solomon Lalani
    Solomon Jan 17, 2020 12:15PM ET
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    Chris: you were good once--esp during Apr/May 2019--but now I have stopped reading you. You need to check your system again as we have still not seen the NQ sell-off that you have been prophecizing for long!
     
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