DEC 21st: PORTFOLIO POSITIONING
During the trading day I tweeted the following:
I opened the first leg of an intermediate term short position in crude oil today via SCO. I plan on adding the next leg during the first half of January. It's a small position (less than 10% of portfolio) to start.
You can read about the macro reasons crude should be up or down from here on countless other sites. My focus is on the price action. Light sweet crude has a significant amount of overhead resistance above the $104 area. In fact, it is what I like to call a "generational area" of supply. Meaning that the market will gravitate towards this area and then become overwhelmed with supply, eventually suffering a significant failure.
The initial failure occurred on November 17th, with no further attempts following this failure point. Since that point crude has carved out a series of lower highs and lower lows.
I expect a move back down to $80 during Q1 2012. Target of roughly 65 on SCO.
There's plenty of time to put on this trade over the next few weeks I am guessing. Don't get your panties in a bunch thinking crude is going to tank tomorrow. Intermediate term trade is 1-3 month deal.
Holding a medium sized short-term position in EDC (roughly 20% of portfolio) and a small intermediate-term position in SCO as of the close today.
