February Crude Oil settled $2.31 higher at $40.02 on Monday. It is reasonable to get two days of strength after nine consecutive sessions of losses; especially with the geopolitical tensions we are seeing involving Israel and Palestine and India and Pakistan. We are still storing crude oil in barges floating in the ocean; supply is robust.
Farm Hedge Recommendation(s): Buy 1 February Heating Oil (per 42,000 gallons of diesel fuel use) @ current levels. Continue to scale-down buy every .15 from entry to cover fuel needs. Lift hedges as you commit to purchasing cash fuel.
Trade Recommendation(s): Sell 1 February Mini Crude at $44.45. Risk to $48.55 with an objective of $32.55. Spread Trade: Buy 1 April Crude and sell 1 February Crude at a $4.25 premium to April. Risk to $1.25 premium April with an objective of $10 premium April.
Working Trade(s): Bought 1 February Gold $600 put (11/4) @ $12.50. Risk to $0 with an objective of $40. The put settled at $0.10 on the day.
Technically, the market is still in a downtrend and rallies are to be sold. Close-in support will be the contract low of $35.13 with $32 and $25 as further support. Close-in resistance is $41.45 with $44.30, $45.80, and $49.50 as further resistance. All major Moving Averages are above the market. Allendale has the next schedule projected major turn day in crude as Tuesday and the US dollar for January 08.
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