Mean Reversion Coming In Energy Futures?

This to me is one of the most fascinating developments in the world right now. It seems like every day another media outlet sends me an email about the lower energy prices and how to benefit from them. It's almost like all of the "How to play the higher interest rate environment" emails and conferences I've been receiving since late last year. As hilarious as that "Rising Rate Environment", nonsense is to us, I have to say that we are seeing similar anecdotal evidence that the crowd is currently dead wrong in energy. But we prefer to use real data and our analysis also suggests that we are at extreme bearish levels in some of these energy commodities that haven't been seen since 2002.

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Here are two charts that make me think the squeeze higher is about to get going. The first one is in Unleaded Gasoline futures. After breaking down below all of the support since 2011, prices crashed to right near the 161.8% Fibonacci extension from the most recent rally in that sideways consolidation. Based on this week's candle we want to see follow through to the upside next week to confirm what we're seeing, but I think it comes soon. We are at bearish sentiment levels not seen since 2002 and the media keeps telling us how to take advantage of lower energy prices. I'd rather take the other side of that:

The next chart shows Heating Oil also finding support over the past month at the 161.8% Fibonacci extension from the most recent rally in this giant sideways consolidation since 2010. Based on the sentiment which is also at bearish extremes not seen since 2002, I think we are about to get a monster squeeze. We define our entry points and risk management levels in this week's Commodities & Currencies report which I think is the best one we've ever delivered to our members. And not for any reason other than the fact that the market has presented us with some incredible opportunities, not just in the energy commodities, but in the currency complex as well:

*Note we are not just basing our analysis on just the fibonacci extensions and sentiment, but we take into account other variables not mentioned here and a weight-of-the-evidence approach to find the most opportunistic risk/reward scenarios.

Members of Eagle Bay Solutions receive these charts on a weekly basis, but with additional timeframes, more variables, commentary, annotations, price targets and most importantly risk management procedures with entry points. I keep this blog to show you guys cool charts and make points that can be better explained through price and market behavior. But our members really get all of the data we gather and I think benefit from the hard work we put towards these markets every day.

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Tags: $RB_F $UGA $HO_F $UHN