I'm an amateur stock trader who likes to use technical analysis to trade my stocks. I can't claim to make a living from it like some people do. However I would like to someday. While watching this Friday's Fast Money I couldn't help but notice all the talk about oil breaking out. I was glad to hear this because as oil broke out yesterday I was putting my Roth IRA into USO. I don't have a lot of money in my Roth IRA, but since it's an account that allows for tax-free gains, I like to trade it. Heres what I saw:
Oil breaking out above its last (Jan 1st) high and breaking out from its yearly highs from Jul 06.
http://stockcharts.com/charts/gallery.html?USO
If this is really the "big one" I want to be prepared to take advantage of it by trading options like many of the traders in 2000 did. Whenever I trade big I tend to get over excited and move with the crowd. This can be dangerous so I am interested in trying to apply a "buy-the-dips" trading style while still trying to take advantage of any runaway breakouts.
Please let me know what trading ideas are working for you in the comments below.
The financial sites are
The financial sites are abuzz with articles attributing oil's rise to the fall in the dollar:
http://biz.yahoo.com/ap/080303/oil_prices.html
If you look back at commodity prices vs dollar strength you will see that they are not necessarily correlated (ie. commodity prices can increase when dollar is strong). In this case the opposite seems to be happening. With investors anxious to seek out gains in alternative investments such as oil we may see some irrationality in oil prices. Many of the analysts on CNBC are already attributing oil's rise to pure trading action. As long as there is irrationality in the market, there is opportunity for profit.
USO is up another 2% today.
USO is up another 2% today. Looks like the breakout is real.