Commodity ETF Alert June 2012 Special Trade Alert

| June 4, 2012 | 0 Comments

June 4, 2012

Special Trade Alert




Every once in a while, an amazing trading opportunity presents itself.  And sometimes the time window to jump on a trade is so small we can’t wait for our normal publishing schedule.  This is one of those times.

What’s going on?

The recent plunge in oil prices is presenting us with an outstanding buying opportunity.

Here’s the deal…

Last month’s crude wipeout was staggering.  The lifeblood of global commerce dived from $105 a barrel all the way down to today’s price of $83… a 20% drop.  European debt fears, along with poor US economic data, sent oil bulls to the slaughterhouse.

Take a look…


As you can see, crude took quite a beating in May.  The sell-off was steep and unforgiving.  Thankfully we closed our last oil trade (USL) at the $104 area… right before the recent drop.

But here’s what we need to focus on now…

Notice the up-sloping green line on the bottom of the West Texas Intermediate chart above.  This is a very important long-term trend line that will likely provide support to the oil market in coming days.  Chances are this technical area will give crude a foundation for a strong rebound.

If this technical area doesn’t hold, we could see oil drop into the high $70 a barrel range. Obviously at that point, crude would be an even better deal.  Either way, oil is close to its lows for the year.

What are the risks to this trade?

If the ongoing European debt crisis goes from bad to worse, we could see oil weaken further.  But I just don’t see that happening.  European leaders aren’t going to stand around twiddling their thumbs while their continent crumbles.

The more likely outcome is a decisive European policy action within the next 1-2 months. Europe’s leaders will likely focus on backstopping their banking system along with integrating the European Union even deeper than it is now.

These steps would provide the confidence investors need to bring bond yields of troubled countries like Spain and Italy back within ‘safe’ levels.

Let’s use the recent sell-off to our advantage and buy a crude oil-based fund for our portfolio.  Here are the details…


iPath S&P GSCI Crude Oil Total Return Index ETN (OIL) is trading at $20.66.
Buy OIL up to $21.25 per share.
Our profit target is $25.00 or more.

*** Editor’s Note*** Today’s special trade alert is not replacing your regularly scheduled monthly edition.  You’ll find your monthly CEA trade alert in your e-mail inbox next Tuesday!

Category: Commodity Trading

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.