There is a sense of security that every trader has when they know that a stock has been trading around and about the price which it is now for a long time, perhaps a few months or years. But, in the case of oil, there is a complete lack of certainty around the market right now.
Should I go long? Short? Neither? The overwhelming response right now is the latter, with most investors scared to use their money. The thoughts going through most people’s heads right now would be “If I go short, the price of oil will rocket sometime soon” or “If I go long, oil will drop even further!” Now everyone knows that these two are mutually exclusive and cannot possibly co-exist together.
The problem is that lingering voice of doubt in the back of our minds which keeps telling us not to invest. This problem is exacerbated if you have made a loss an oil recently, and most people just sit there licking their wounds long after that. The bulls of the market will be telling you to buy right now, and that is probably solid advice considering oil has to skyrocket sometime now, right?
Try getting a margin call when oil goes down and see if you can say that again with a straight face. No-one has any doubts that, when oil rises and eventually hits around $60-$70 a barrel, people will be going long like there’s no tomorrow.
But I can’t exactly say the same for right now, even though oil is $20 lower.