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Oil Crashes 8% and Looking Lower

Now that oil has crashed 8 percent, is it really the worst that the crude industry will see in the United States? This is what many experts believe, but is it realistic to base your trading of this commodity off of this information? This is the worst selloff that crude has seen in about five months, but a barrel is still about $10 off of its six year low. While many believe that the worst is over for oil, others believe that there’s still a lot more downward pressure and that there’s a chance it will test the six year low and fall below $42.

It’s important to look at precisely why oil has fallen so much in price first. Much of this sudden movement is in response to the crises in both Greece and China. Greece has decided to reject economic bailout terms, which threatens the stability of the euro and the EU as a whole. This has had an ongoing impact on U.S. stocks and now it’s oil’s turn to be hit hard. As far as China goes, their stock market has fallen dramatically in value, and it’s only natural that other assets and markets will be impacted. For oil to be hit so dramatically isn’t a surprise; China has a huge economy and the country uses much crude. The combination of these two factors had an unusually strong result in this instance. Also, consider the timing of talks in Iran, where a self imposed deadline of July 7th was missed on a nuclear deal. Really, the only thing that oil did have going for it is the seasonal demand that summer always creates. This will be ending soon, and traders are well aware of that fact. In other words, oil fell so strongly because of a combination of many bad factors all at once. Once the drop began, it spiralled out of control for a while, but that doesn’t change the fact crude oil still fell. Binary options brokers know price action will continue to be volatile over the next coming months.

Next, ask if this is going to stop. China’s economy is far from fixed, Greece’s situation has gotten less likely to be solved easily, talks in Tehran are likely to be extended to help themselves acquire nuclear power, and the summer is well under way and driving is likely to start decreasing. None of these things are permanent in how they will affect oil, which means that it will be going up in price again eventually, but there’s a strong chance that not a single one of them will be resolved in the next few days. That means oil is likely to drop more in price before it starts climbing for good. The 100 day moving average, which current prices are well under now, also indicates this. In short term trading, when the news is against you and the technical indicators are against you, it’s very hard to let other things push through. In this case, there’s very little except for short term fundamentals that will be pushing oil upward for the next few weeks. In short, the price of oil will probably go down a little bit more before it begins to recover.

Short term traders and ultra short term binary options traders need this information if they are going to succeed trading crude. This is the world’s most widely traded commodity, after all, and there are a lot of opportunities for both traders and investors right now. Traders know that another day of losses is likely in the near future, and investors know that the long term outlook for oil is bullish. Both sets of people are able to start preparing themselves to make a profit off of this.

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