Crude futures have been on a run since the start of the year. Bouncing off lows in the high 30's, crude tested the yearly high mark of $55 this week. Has the bull market returned?
Whether a particular market is bullish or bearish always depends upon the time frame of the price sequence being observed. Traders may be bullish on a 1 day price pattern, yet bearish on a 1 year pattern.
The inherent scarcity in crude supplies long term keeps the bulls in charge until a disrupting technology/ies, replaces crude as a base fuel stock. Therefore, traders will be looking to buy crude on price dips.
How does a trader now when a particular dip in crude will not dip even further? An excellent indicator is the price pattern of energy stocks. Energy stocks began declining well before crude hit its $149 high. Alert traders took advantage of this signal and began shorting crude. Over the past few months we began to see energy stocks move higher. Subsequently crude followed equities' lead.
Using the energy equity indicator, traders have a higher probability of successfully executing a bull trend strategy.
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