Technical Sector Timing for Crude Oil and Natural Gas

By: Chris Vermeulen | Thu, Jul 9, 2009
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The broad market including commodities is under some serious selling pressure as traders and investors panic to exit positions. Today small caps stocks and commodities took the majority of the beating. Although the market looks bearish at this point, I do think there is a very good chance of a bounce Thursday and Friday, but I figure we will see selling into the close on Friday as traders stay in cash over the weekend.

This week's price action for all our funds provides us with new technical analysis on the charts. Support levels were broken and we are now in free fall mode for these four commodities. I do like the way the charts are setting up. The bigger and quicker the drop in price the better the odds that the next setup will follow through for a profitable trade.

Oil Sector Timing - USO ETF Fund

Because of crude oil's extreme popularity of speculate traders, the price has dropped like a rock. The price broke down from is head & shoulders pattern last week and everyone saw this which triggered another wave of selling. Oil is currently at support and we could see a bounce or sideways action here.

Natural Gas Sector Timing - UNG ETF Fund

Natural gas managed to hold its ground today. Many traders were spooked with UNG halted Wednesday because they are trying to add more shares to the fund. UNG applied for 1 billion more shares to the SEC. They may or may not get them and if UNG cannot increase the amount of shares then this fund will start to trade like a closed end fund. This means shares will trade at a large premium or discount from the actual price of gas simply because of supply and demand from investors wanting to own shares. If this happens we will simply move on to a different gas fund to trade.

UNG broke down this week and now trading at support. Overall price action is still very bearish so let's wait and see what happens over the next few days.

Technical Sector Timing of Commodities

So far this week the market has caused some serious damage to the technical's. Overall the market looks over sold and I am expecting a positive day tomorrow. The price action today looked very much like panic selling and that is generally when we see stocks and commodities rebound for a couple days.

The S&P500 penetrated a critical support level intraday but closed higher. One more down day in the market and we will most likely see program selling step in which will force stocks lower for another couple days triggering even more panic selling.

We continue to let the market unfold analyzing the technical's on a daily basis. Waiting for a low risk trade can be a slow process but this down time allows us to learn and fine tune our technical analysis skills even more.

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Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

- Interactive Brokers
- Trade MONSTER
- MB Trading
- OEC OpenECry
- The Fox Group
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He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

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