Monday, June 30, 2008

Oil at new highs but divergences

Oil spiked to new highs the next day following the FED decision. I wrote in the post US dollar prediction and Fed rate pause about some negative divergences in Oil and Gold.

Read this chart carefully. The top bar shows the RSI. Whenever price makes a new high, the RSI should move above 70. We had two new high days in USO but the RSI is still below 70 !!!

Next problem is the CMF- Chaikin Money Flow. I would have really liked to see BIG green bars here but all I am seeing is just one small green bar.

I still have oil stocks such as Pyramid Oil (PDO) and Royal Oil (ROYL). Having tight stops on both of these names. Oil needs to correct these divergences quickly, otherwise we will have a reversal.

Gold however has corrected its negative divergence. I have GLD ETF. Also played a quick round on Yamana Gold(AUY).

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