Oil - Update - Will the Mo-mo Longs Turn Into Mo-mo Shorts?

Mea culpa, mea culpa... I was touting how what a great idea I thought it was to buy oil as it pulled into the trendline even after breaking the 200 day MA. So much for that idea!

The over-3-year upward channel broke decidedly today. No ifs, ands, or buts about it--and it showed! Every big long player who may have been defending their longs put on because of the pullback into the lower trendline of the channel bailed as crude futures dumped again eventhough it was grossly oversold going into the day. If you didn't take a stop on a crude futures long position by the close today (at least on a partial piece of your position--I definitely condone holding some as the odds of a decent bounce to sell into is likely), then you either like losing money, love pain, or your pockets are much deeper than mine.

Now, what to do?

Well, its still grossly oversold (see chart above), but its safe to assume that any momentum crude trader who was trading long previously, will likley switch sides and start trading the "mo-mo" short. Any bounce in crude at this point will be sold aggressively by most of the big players out there, and unless some sort of terrorist act, oil refinery shutdown, hurricane comes about, there won't be enough longs out there to get oil back over 70 in the near term, in my opinion.

Trading Ideas

I think since crude is as oversold as it is it could bounce down here and a good course of action could be to:

1) Sell any current longs that you are in on any bounce near/around the 200 day MA (which currently stands around 70).
2) Sell any current longs on any bounce to the middle Bollinger Band (aka the 20 day MA)
3) Initiate short positions on any retracement to the 200 day MA, or the 70 level. A safe stop on the short would be around 72, or if you like to have looser stops, the 74 level (just above the recent high buying blip in the current massive selloff.)

Oh well... a 3 year trendline has to break sometime, but as we can see, buying every previous retracement to the trendline would have (and should have!) made you a lot of money so taking a stop on this one should not have hurt too badly (if you took your stop that is!)

Other Markets...
I think Treasuries (10 yr Note, and 30 yr Bond) could be setting up for a great trade... will post more about this over the next couple of days, with some good charts and TA.