What does it have to do to make you sell it? What have bears got to do to be heard? How do I know when it’s all over and selling seems to be the hardest word.
It’s bull, its bull, it’s a buy, buy situation, and it’s getting more and more absurd. It’s mad, we’re glad, cant’ stop to think it over, oh it seems to me, that selling seems to be the hardest word.
Oil continues to creep higher hitting over $73 a barrel and the bulls are coming out of the bulls and the bull predictions are coming out of the woodwork. Even $250 a barrel! (Eee gads!)
Instead of losing momentum the market seems to gaining steam leading to one of the hardest questions a trader has to ask. We are seeing more bullish signs such as a dollar that continues to slip into oblivion. No signs of fiscal responsibility in Washington and no exit strategy from the Fed on its policy of printing money. We are getting reports of growing demand from China and news from International Energy Agency raised its global oil-demand forecast for the first time in 10 months on signs that the economic slowdown is abating. With the bull momentum raising the million dollar questions a trader has to ask and that is when I sell?
For me this is even more difficult as back in March when the Fed instituted its policy of quantitative easing and oil broke through $50.00, I said that oil would target near $74 a barrel. At that time someone asked me how I could throw out wild numbers like that. How could I know that or predict that oil could go to that price. What kind of divine knowledge that I had and if I used a crystal ball. No I used a chart. It is called technical analysis and it was a very simple measurement. Yet what is not simple now is that oil is quickly advancing upon my target so now I have to wonder whether or not I just take profits and abandon the trade and just not care that this market can continue to go higher. Or do I analyze the growing momentum in this market and ratchet up my target and try to ride this baby for every penny it's worth. Obviously on this there are two schools of thought.
Old time die hard technical traders would tell you to take your profit and walk away. What good is technical analysis if it does not give you trading discipline? Where to buy and where you are wrong and where you take your profit, turn off the screen and walk away. Where the discipline is if you keep moving your target then that opens you up to over interpreting the charts and breaking the technical rules that gave you the winning trade in the first place. Besides as the old adage goes, you never go broke taking a profit
One of my great mentors and teachers of trading was the great Barry Lind. Barry, who you might know as the Lind part of Lind-Waldock, was one of the great technicians of all time. Barry would not go for those charts printed by a computer because the only way to get a feel for the market was to take pencil and rule and do them by hand. Barry in his trading blueprint “Method Trading” said that while it is true that you will never go broke by taking a small profit you will never get rich that way either. Barry would analyze a multitude of factors when a market came close or hit his target price and see if the market momentum is rising or falling.
He was a big believer in cutting loses and raising the stop and let those profits rise.
The truth is you have to ask yourself whether you want to get rich or just make a smashing good trade. It depends on your own circumstances. Putting greed aside we all want to get rich but at the same time you could go broke trying to get rich.
If you are smaller trader and your capital is limited take the profit. Do not look back or feel bad if oil goes to $100. Profits are good. Take some money out of your account and by yourself a treat. If you are a larger trader and can afford to give some back then let it ride. The risk is that we will see a sharp reversal when we finally do run out of steam. I think the greatest risk of that happening is if the Fed signals a rate increase.
Some say that the Iranian election could tank oil especially if President Ahmadinejad loses the election. Though I think oil might sell off a little, the truth is that the President of Iran has little real power and their moderates are not really moderate. In fact the best hope for a moderate seems to be Hossein Mousavi.
Haaretz news reported that the International Atomic Energy Agency documents revealed that Iran began a secret nuclear program during the tenure of Mr. Hossein Mousavi, the opposition leader running against President Mahmoud Ahmadinejad. The documents, which Iran transferred to the IAEA several years ago, show that Tehran decided in 1987 to purchase the centrifuges it is using to enrich uranium.
Happy Friday! And remember we are an equal opportunity brokerage as we take both buyers and sellers! So call today at 800-935-6487 or email me at pflynn@alaron.com to open your account and see me each day on the Fox Business Network!
We're long July crude from apprx 5959 – stop to 6990!!!
Buy July heating oil at 17200 - stop 16700.
Buy July RBOB at 19000 - stop 16900.
Buy July natural gas at 330 - stop 290.
