Crude Oil: Broken Or Bargain?


Oil prices fell toward $100 Thursday, pulled lower by strength in the U.S. dollar, soft global energy demand, and a report Saudi Arabia has no plans to cut output despite OPEC's agreement this week to trim supply.

The losses were tempered somewhat by intensifying disruptions caused by Hurricane Ike, which paralyzed a quarter of U.S. crude oil production and more than 16 percent of its refining capacity.

As the selling pressure in oil continues, is there any way for you to trade it one way or the other?

Yes, exclaims Jeff Macke on CNBC’s Closing Bell. By ignoring the large scale fundamental anaylsis and recognizing the chart for oil is... broken!

To trade fundamentals Macke thinks you need an information edge; that is, a take that other people don’t have. And he doesn't think that exists in oil.

“What we saw in oil… as well as the commodities and ag names was a bubble that inflated and finally burst. You can’t make a fundamental argument that $140 was any more rational that $100 on crude. Therefore you’ve got to trade the charts.”

Macke might be the Lone Wolf but he’s hardly alone in his outlook. "This is a market that wants not only to test $100 a barrel but ultimately break $100," echoes Tom Knight, trader at Truman Arnold in Texarkana, Texas.

The Bottom Line: Crude is broken.

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