Conclusion, Investment Implications, Strategy
The Invesco DB Oil Fund (DBO) is amid favorable conditions to resume its November 2020 major uptrend from minor Tactical support near $14.04, which is currently being tested. A sustained rise above this area would target an additional 15% rise to $17.30. This is an Asbury Momentum trade idea.
Analysis and Rationale
The Invesco DB Oil Fund (DBO) seeks to track the DBIQ Optimum Yield Crude Oil Index Excess Return (DBIQ-OY CL ER), which is intended to reflect the changes in market value of crude oil. The single index Commodity consists of Light, Sweet Crude Oil (WTI). The fund invests in futures contracts in an attempt to track its corresponding index.
The rightmost green highlights in the upper panel of Chart 1 below show that DBO is currently rebounding from a Nov 4th test of its 50-day moving average, a widely-watched minor trend proxy currently situated at $14.04. Meanwhile, the blue daily relative performance line between ANGO and the SPDR S&P 500 ETF (SPY) in the lower panel is rebounding from a coincident test of its 63-day moving average, which is our Strategic time period. Note that previous similar coincident tests of these outright and relative moving averages closely coincided with Tactical bottoms on Jly 19th and May 20th.
These conditions suggest a new Tactical buying opportunity within DCO’s November 2020 major uptrend as defined by its 200-day MA.
Table 1 below shows that considering a $17.30 upside target and a protective stop placed below the $14.31 area, a long entry price of $15.04 would provide a 1:3.1 risk/reward ratio (risking $1.00 to make $3.10) with an initial risk of 4.9%.
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