Clockwork Charts | Stock Charting Podcast

There are many ways to invest during a crisis such as 2020, and oil is no exception. The main difference with oil investing compared to regular equities is that the oil industry has been not doing well in general going back even a few years before the crisis. 

This video assumes that you have already made the decision to invest in oil and are reviewing the ways of doing it. Perhaps in a future video I will weigh in on if I actually would do the same thing myself.

This video will cover 4 different methods or asset classes which are possible ways of investing in oil. Of course there are other instruments but I'll just cover these. Which one you choose depends on your risk tolerance, account size, account type and also how much time you are willing to spend maintaining the positions. 

My key point is that there have been heavy new money inflows into one retail instrument for oil which seems to be a favourite amongst many retail investors; but their favourite is actually my least favourite. I will explain to you why I believe this instrument is a bad idea and what are the alternatives. Of course, I can't give out any investment advice and you need to choose but I'm still going to give the reasons.

In these unprecedented times in this crisis of 2020, this look very bad for the oil industry at this point. Oil tankers are plentiful around the world, storing oil with nowhere to go and running out of storage. While this is collapsing prices, especially the front month oil contract, behind the scenes it's also collapsing investment in exploration and drilling. This is really one of the only fundamental arguments for oil, lack of investment in exploration now will make oil more expensive once demand returns. 

We don't know how many years it will take for demand to return, but what we do know is that new wells and new production will be slowing. This could possibly be a drag on supply in the future.

The only other possible bullish tailwind in the future for oil is weakening the USD. This currency is very expensive now and it's possible that governments may take action much like they did in the 1980s to lower the value of the USD. This would make oil priced in USD more expensive.

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The McClellan oscillator is a powerful charting tool indeed, one of the all time greats in technical analysis. Founded by the McClellan family, Tom carried on the family tradition in charting and is doing some top rate work. I've been using this indicator as one of my tools for a number of years. But Tom recently came out with one of his email newsletters explaining this a little bit clearer than I've been using the indicator.

There are two ways of properly using this indicator according to Tom. He calls it a simple and complex method. I lean towards doing this in simple ways in trading and Tom seemed to go this way as well in this case. Trend lines can be drawn on the indicator by following a series of lower highs on the chart. It's simple, when the indicator breaks out of this trend, it's bullish. 

Shortly after this episode was aired, there was a quick and large correction in the S&P 500. The McClellan oscillator structure has been setting up nicely as mentioned in the podcast. At the critical moment, the indicator had a failed breakout of the uptrend. This indicated that the bears are still in charge of the market. 

As of early March 2020 we'll still have to wait on standby for the bulls in terms of what's going on with the McClellan oscillator. It still remains deep in negative territory and actually reached a lower level than at the depths of the Q4 2018 selloff. The trend line I drew in on the oscillator is still valid so let's see how long it takes to break out of that trend of lower highs.

I'm breaking my own trend on the channel a little bit and posting an instructional video. I hope you like it as it'll be a part of a playlist and hopefully the first of many.

Credit to Tom McClellan's Free "Chart in Focus" material which inspired some of the content in this video. It's highly recommended, also consider some of his paid services! Please reach out with any feedback, most importantly the reason I create trading content is to meet with other traders. I'm big on the quality of followers of my content, I try to get to know each one personally.

To Watch this podcast episode on YouTube: https://youtu.be/0_VF8iEUj7s

Clockwork Charts, https://clockworkcharts.com

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https://anchor.fm/clockworkcharts

Patreon: https://www.patreon.com/clockworkcharts

Twitter: https://twitter.com/clockworkcharts

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