Commodity Trading Trends: Crude Oil Slipping

In the wide world of commodities, crude oil is developing an enticing downward trend. With that in mind, this fossil fuel represents a big opportunity in today’s markets, as its price has been tanking as of late. Crude has lost more than 8% of its price in the trailing five days as investors watched the fossil fuel close below $100 for the first time in recent memory. “The Energy Department said last week that U.S. crude inventories have risen to the highest level since 1990. That was followed by the Labor Department on Friday announcing the economy added only 115,000 jobs in April, far fewer than the 165,000 analysts were expecting” writes Pablo Gorondi.

As crude continues to tank, there is a major opportunity for traders to profit in the short term. On one hand, a short position in this fossil fuel could be extremely lucrative in the near-term, as it seems that crude has lost all momentum. But the lack of momentum also means that crude prices are sitting at lows not seen for some time, which could allow traders to get in at an attractive price. It should be noted that crude prices often spike in the summer months so now could also be the perfect time for those who are looking to establish long positions [see also The Ten Commandments of Commodity Investing].

Ways To Play

For investors who have a strong opinion on where crude is headed, or for traders looking to make a quick return, there are a wealth of options available. Perhaps the most direct method comes from the March crude oil futures contract offered on the NYMEX for both WTI and Brent. But not everyone is savvy to futures markets as they can be quite complex and difficult to understand. Investors with bold opinions can utilize the 3x Inverse Crude ETN (DWTI), which employs a 3X inverse leverage on crude contracts, or the 3x Long Crude ETN (UWTI) which offers a 3X long leverage on the same contracts. Finally, for those looking for a more indirect play, stocks like ExxonMobil (XOM) or Chevron (CVX) also make for interesting opportunities [see also 12 High-Yielding Commodities For 2012].

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Disclosure: No positions at time of writing.

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  • Anonymous

    At $80 crude will be a buy

    • http://twitter.com/JaredCummans Jared Cummans

      The only problem with that price target is that Middle Eastern conflicts could heat up in a matter of days and re-inflate prices back to their $110 and $115 levels again. Investors just have to keep a very close eye on crude if they are looking for an entry point.

      • Anonymous

        Yes, anything can spike oil. Buy there is an election coming up so chances are not much will happen to do that until after the election.