Memorial Day weekend is just seven weeks away. And you know what that means…
Gas prices are going higher.
It’s the annual gouging of the American consumer. It happens just about every year – starting in late April and going into Memorial Day. Oil prices rise. Gas prices rise. And, we empty our pockets in order to fill up our tanks.
This year, though, the gouging is likely to be more severe than normal…
We’ve all been cooped up for the past 13 months. We’re anxious to get away. And, whether that getaway is by plane, train, or car we’re going to be using more oil.
And, if the chart is any indication, the price of oil looks ready to make a big move higher. Take a look…
The price of oil has been pulling back a bit over the past month – dropping from a high of just over $65 per barrel to the current price near $61. That action has forced all of the various moving average lines to coil together. This chart is building energy for the next big move.
The last time we saw similar action in the chart of oil was back in October. Oil had been chopping back and forth for several weeks. The moving averages were coiling. And, we figured oil was setting up to make a big move higher.
The price of oil is more than 50% higher today than it was in October. And now, we’re coiling again.
Bearish traders might argue that the price of oil could just as easily break down from this coiling pattern as it could break up from it. And, that’s true. But, the seasonal tendency is for oil to rally this time of year.
When you combine that seasonal factor with the tight coil pattern, the odds favor the bulls on this trade. So, get ready to be gouged at the pump over the next month.
But, traders who buy oil today probably won’t mind.
Best regards and good trading,
Jeff Clark
Editor, Market Minute