Investors should beware that rising crude oil prices have been the driver of higher inflation since the early-1970’s when we experienced an oil embargo and those long lines at the gas stations. The price at the gas pump rose from like 35 cents a gallon to about $1.50.
Nymex crude oil is just one of several investment choices that include an energy exchange-traded fund, or specific stocks such as Chevron (CVX) and Exxon Mobil (XOM), or more speculative oil and gas exploration companies.
Here’s the weekly chart for Nymex crude oil.
Courtesy of MetaStock Xenith
Nymex crude oil broke below its 200-week simple moving average or ‘reversion to the mean’ during the week of Aug. 22, 2014 when the average was $96.17. Oil bottomed during the week of Feb. 12, 2016 at $26.05 per barrel. Oil has been moving sideways to up
since then and ended 2017 setting a multiyear high of $60.51.
The weekly chart is positive but overbought with oil above its five-week modified moving average of $57.34 and above its 200-week SMA of $57.39. The 12x3x3 weekly slow stochastic ended 2017 at 90.00 well above the overbought threshold of 80.00. Oil has been overbought since the week of Nov. 3.
Given these charts and analysis, investors should buy weakness to my monthly value level of $56.67, and reduce holdings on strength to my annual and quarterly risky levels of $63.81 and $64.53, respectively.
As crude oil prices rise the price at the gas pump becomes a tax for Main Street USA. However, a higher price reopens fracking operations that have been closed as lower prices that some operations too expensive.