Give Me WTI Over Brent Crude All Day

For several years now, the price of Brent Crude Oil has been nicely outperforming prices of the West Texas Intermediate light sweet crude oil. But I think we’re finally starting to see that shift in momentum back towards WTI.

Here is a chart of $USO vs $BNO, the two ETFs that represent WTI and Brent crude oil. You’ll notice the brief new low in November that quickly came back and sparked this recent rally in the spread:

2-21-14 uso vs bno

This next chart takes a closer look at that whipsaw in the USO/BNO spread. Not only do you have an island reversal of sorts down there, but also a nice bullish divergence in momentum:

2-21-14 uso vs bno candles

I think this spread can easily get back to 93, but this false breakdown can absolutely be the catalyst to take this spread substantially higher and well above parity.

From a risk management standpoint, more tactical participants want to see this spread hold above 82. A breakdown below that would signal to me that more consolidation may be necessary. Under those circumstances, this chart becomes messier. We definitely want to see those levels hold.

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Tags: $BNO $USO $CL_F

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