If you’re thinking about chasing the price of oil higher right here, think again.
The price of oil has gone parabolic. And, parabolic moves always end badly – with the asset often giving back all of the gains from the big rally.
Think about what happened to silver earlier this year. Here’s the chart…
Silver started 2026 trading near $75 per ounce. It then exploded higher – trading above $115 just four weeks into the new year. It was a parabolic move. And, traders were jumping all over each other trying to buy into it.
One week later, the price of silver was back down to $75 per ounce. The parabolic pattern broke down – as it always does. Traders who chased silver higher are now stuck in a losing trade.
Now, let’s look at oil. Here’s a chart of the United States Oil Fund (USO) – the ETF that tracks the price of oil…
Three weeks ago, USO was trading near $75 – inside the $65 to $80 trading range it had been in for all of the past year.
Then, the military action in Iran disrupted the oil market and USO exploded higher. It closed Wednesday over $121 per share – a 61% gain in just three weeks.
Traders are now jumping all over each other to get into the trade. It looks like the military action in Iran is going to last longer than expected. Middle East Oil Ministers are talking about the potential for oil to trade as high as $150 to $200 per barrel. And, traders are afraid to miss out on that action.
So, they’re chasing prices higher into a parabolic move.
Maybe they’re right. Maybe oil will trade sharply higher. And, maybe buying USO right now at its highest price in ten years can be a profitable trade.
It seems to me, though, that this is a low-probability trade. And I only recommend trades when risk is low, and reward is high (you can check out my trading approach right here).
Parabolic moves always end badly. And, when this one ends, USO will likely head all the way back down towards $80 per share.
Of course, USO could keep pressing higher in the short term. Parabolic moves can persist a lot longer than anyone thinks possible. But, in order to profit, you have to be fast enough to head for the exits before the rest of the herd.
If the action in silver is any indication, most folks aren’t that fast.
Best regards and good trading,
Jeff Clark
Editor, Market Minute
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