Just a quick note about crude oil’s plunge and our preferred take on the situation.

Our short positions were closed automatically on Friday, at an enormous profit of above $8 in less than 2 weeks. Congratulations.

Of course, the profits would have been much bigger if the position was held over the weekend, but today’s slide was based on surprising fundamental news and it was relatively unpredictable. We might have seen a huge rally today based on some other fundamental development, which could have erased most of our profits in a single day. Instead, we have cashed in on huge gains on Friday.

Now, where do we go from here? It’s relatively unclear. On one hand, the price of crude oil already reversed, so it might be the case that the worst is behind us and that we’ll see higher black gold prices shortly. On the other hand, the momentum is extreme, and we could easily see even lower prices. Please note that in early 2016, when crude oil was at similar levels, crude oil rebounded for several days, only to move a bit below the initial bottom before rallying substantially. The situation was tricky back then, and it is tricky now. Consequently, it seems best to wait for some kind of confirmation before opening another trading positions.

As always, we’ll keep you - our subscribers - informed.

Thank you.

Nadia Simmons
Przemyslaw Radomski, CFA