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<\/p>\nIt’s time to buy oil.<\/p>\n
The price of the gooey, black stuff had been crushed – falling from over $80 per barrel at the start of July to as low as $73 last week.<\/p>\n
The “experts” are bearish. They’re pointed to bloated inventories and fears of a global recession. And they’re telling us the price of oil is headed lower.<\/p>\n
But my favorite oil trading indicator just flashed a “buy” signal.<\/p>\n
So, I’m ignoring the experts and suggesting oil would be trading higher over the next few weeks.<\/p>\n
Take a look at this chart of the CBOE Crude Oil Volatility Index (OVX) along with its Bollinger Bands…<\/p>\n
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Similar to the stock market’s Volatility Index (VIX), the OVX provides buy and sell signals whenever the price of oil pops outside of its Bollinger Bands (solid blue lines).<\/p>\n
Bollinger Bands measure the most probable trading range for a stock or an index. When a chart pokes outside of its Bollinger Bands, it indicates an extreme move – one that is likely to reverse.<\/p>\n
On the OVX chart, we get buy signals when the index rallies above its upper Bollinger Band.<\/p>\n
We’ve had three previous buy signals (blue arrows) since the start of 2024.<\/p>\n
Here’s how the price of oil behaved following those signals…<\/p>\n
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The price of oil rallied immediately following all previous buy signals over the past year (blue arrows).<\/p>\n
Sometimes the rallies were significant, lasting several weeks – like the rally in June that pushed oil 15% higher in five weeks. Sometimes the rally ran out of fuel within just a few days – like the April buy signal which produced a measly 2% gain.<\/p>\n
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