Almost 4 months ago, I told you that we’re still bullish on oil. It hasn’t been an easy ride being an oil bull… but I’m as bullish as ever and thrilled with how our indicators have helped to see the situation clearly.
Crude oil triggered a new Stock State Entry (SSI) Entry signal in late October 2016. It moved higher in late 2016 and the first part of 2017 due to OPEC imposing output cuts on its member nations.
After making a near-term high in late February, the price began to fall when rumors started circulating about OPEC members ignoring their limits and flooding the markets with an overabundance of supply. Of course, that sent the media into a tizzy and headlines such as this one on CNN were rampant.
I had to chuckle to myself when I saw the headlines. You see, crude oil has a Volatility Quotient (VQ) of 33.34%. A “bear market” drop of 20% from its high barely nudged crude oil into the SSI Yellow Zone!
It’s thrilling to me when I see such clear examples of how the TradeStops VQ helps shut out the noise. Before having VQ to help me know what was noise and what was not I would have been panicked about a 20% drop in oil. Today, it’s a yawn … and crude oil is back in the Green Zone once again.
Worldwide demand for oil remains on an upward trajectory. The industrialized countries have recovered from the financial crisis and the emerging market countries continue to grow.
Open interest in the oil futures markets continues to rise and that is a bullish sign.
The strongest individual cycle of my proprietary time-cycle forecasts is very bullish through the end of this decade.
Oil can be difficult to invest in for the average investor. Many people don’t want to invest in the highly leveraged futures markets and the ETFs that follow crude oil have poor results and high expenses due the necessity of rolling their futures contracts every month.
So, how can an investor take advantage of this bullish crude oil situation?
Look at the countries that produce and export oil. There are two of them that make sense right now. RSX is the ETF for Russia. The price of RSX is 86% correlated to the price of oil. EWZ is the ETF for Brazil. EWZ is 83% correlated to the price of oil.
Both RSX and EWZ triggered SSI Entry signals in March 2016 when oil started bouncing higher from the lows it made under $30 a barrel. Both are positioned to take advantage of the potential move higher in crude oil.
It’s not easy being bullish when the noise reaches extreme levels. But I’ll continue to trust the signals and tune-out the noise. I recommend you do the same.
Have a good weekend,
Richard Smith, PhD
CEO & Founder, TradeStops