Cedar Rapids Trading Program

Learn from the Best

Oil Prices are Low and Set High

The Saudi Arabian minister of oil has been removed from his post, beginning speculation that oil prices are about to start rising dramatically. A lot of the recent moves that crude oil has seen when it comes to price per barrel have been because of the fact that OPEC, of which Saudi Arabia is the largest contributing member, had been working toward cutbacks in production. However, a lot of these gains had stalled out recently, and the thought is that a new official in this position will correct the issue. A new central banker was also instituted in Saudi Arabia, adding to the shakeup.

As a short term trader, it’s important to see news items like this and act upon them. Even if the news does not bring substantial fundamental changes to the price of crude oil, it is likely to cause tremors within the market, and positioning yourself so that you can make profits off of the news is the smart thing to do. Now, if you are not interested in trading high price commodity futures, there are always other methods to create wealth out of the fluctuating price of oil. Focusing on the stocks and ETFs that rely on oil can be helpful, as can using binary options to create small but powerful profits as the price changes minute by minute.

Oil is the world’s most heavily traded commodity, and its low price has been cited as one of the main contributors for recent worldwide economic slumps. However, this shakeup inside of Saudi Arabia has already begun to show signs of improving the Gulf’s economy. The Tadawul All Shares Index went up by 0.2 percent Friday, marking the second day of steady gains for the Saudi stock index. Almost 65 percent of the companies included in this index gained in value—over 110 companies in total. That’s an impressive move in an economy that has relied almost entirely on oil in the past. Much of this looks like it is an attempt for Saudi Arabia to diversify its economy so that oil is not as central to the economy, and although this is something that has been rumored to be happening for decades, it looks like it is finally being implemented. This may slowdown the growth rate that oil is capable of achieving, but it adds much more stability to the Gulf economy, particularly that of Saudi Arabia.

Of course, as you think about entering positions that reflect this news, be sure to use the appropriate indicators to time your entry points as precisely as possible. Just because momentum is shifting upward does not mean that all bullish trades concerning oil, oil companies or indices, or the Saudi Arabian economy in general will be profitable for you. Many traders like to use price channels or support and resistance points to time entry and exit points, and this can be very beneficial to you, too. Just know that there is still a lot of room for error if you rush into things. Also, be aware that the fervor over the changes in Saudi staff is likely to be short lived, especially if no noticeable changes occur quickly. This could lead to a reverse bounce effect, where prices rise dramatically, and then drop to or below the levels that they were previously at. Prices have already gone up over $10 per barrel in the last few months, so it is smart to have a contingency plan in place. It’s unlikely that they will fall down to the rock bottom prices that they were at then, but knowing what to do in any sort of circumstance is a prudent move on your part.

Cedar Rapids Trading Program © 2014