As of this post Crude oil is lower by 3.16% hitting my second target $89.25 early Wednesday morning (see previous post). Continue to use the Fibonacci levels as your targets as a trade under $87 in November futures is my third and final target. I will keep traders abreast as I am not clear on if I will be reversing under $87 or looking to buy at lower levels. I will react depending on the price action. I think a lot of this will have to do with outside markets forces in the coming weeks.
Support For Move Lower
The fact that the distillates finally look like they are starting to move lower should support further weakness. In recent weeks and months it has been the tail wagging the dog with RBOB higher by 35% and heating oil appreciating 27% in the last four months.
My favored play for bearish Crude oil trades is shoring futures while simultaneously selling out of the money puts. The idea is you make more money in the futures than you lose in the options. This strategy lowers your margin and also cushions a loss if the futures moves in the wrong direction. It is not fool proof but in my experience it allows more flexibility than outright futures or options plays.
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