Crude Oil may have found capitulation low

by Gary Glover

Crude Oil has plummeted from $108 to $64 a barrel in a five month period.  One thing we know about vertical lows and vertical highs is that these sort of vertical markets always end with a bang.  Wide extreme ranges and a massive spike in volume almost always mark capitulation lows. 
The large volume is a sign that the sellers have basically given up in the end and the buyers finally step in after a massive decline and take a position of strength at the lows. The other ingredient is wide ranges, the high and low for the dad measure the daily range.  A capitulation will almost always end up being at the largest or very near the extreme range of this instrument. 
In Crude Oil's case, after 5 months of declining it recently had a 4% decline session, followed by a larger decline of 6% and then another 10% down the following day. The extreme moves are an indication of a capitualtion low coming. Last night it finally bounced and had a low of 63.80 and finished above 69.00 experiencing one of its largest ranges, basically a 10% range for a single session. Unless we experience a larger range in the coming days this is usually a strong sign that the low is in. This could be good news for Oil stocks trading ion the ASX like WPL, STO and OSH as recoveries can often be sharp.


Gary Glover is an Authorised Representative (Rep No. 259215) of Novus Capital Limited ("Novus"). Novus is a holder of Australian Financial Services Licence No 238 168. Novus, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.

Subscribe to our Daily Newsletter?

Would you like to receive our daily news to your inbox?