By Nigam Arora
President Trump has said gasoline prices are too high. He asked Saudi Arabia to increase its oil output by two million barrels. People who understand the industry immediately said there was no way the Saudis would raise its output because that would lower prices and profits.
Now the news is that Saudi Arabia is offering extra oil to some Asian customers. You don’t have to be a genius to infer that Saudi Arabia is indirectly complying with Trump’s request. In addition, with some help from Russia, Trump may succeed at lowering gasoline prices. Let’s examine the issue with a chart.
Please click here for a chart of oil ETF /zigman2/quotes/203483736/composite USO +1.10% . The USO chart is being used instead of oil futures because most investors do not trade futures. Oil ETFs such as Velocity Shares 3x Long Crude Oil , Velocity Shares 3x Inverse Crude Oil and ProShares Ultra Bloomberg Crude Oil /zigman2/quotes/208496666/composite UCO +1.87% are popular, but it is better to use USO for analysis because it is not leveraged and is highly liquid. Please note the following from the chart:
• The chart shows the recent oil breakout.
• The chart shows the downgrade of oil by The Arora Report. The Arora Report ratings on oil and other indicators on oil are widely followed.
• The chart shows the signs of an oil rally failing.
• The chart shows oil fell below the support on heavy volume.
• The relative strength index (RSI) shows that oil is oversold and a short-term rally can ensue.
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Oil ratings and indicators
Here are our current ratings on oil.
Short-term: Mild negative.