From the desk of Steve Strazza @Sstrazza and Ian Culley @IanCulley
When reviewing our chartbook this week, one major theme that stood out is the relentless bid we continue to see in Crude Oil.
Most risk-on commodities have consolidated or pulled back recently as the dollar has rebounded back to its highest level in over three months.
But, not oil...
Crude has completely ignored this action from the US Dollar and tacked on an additional 12% gain since DXY bottomed about two weeks ago.
Ever since trading at negative prices last spring, Crude has been on an absolute tear.
Price just broke above its key prior highs and closed the week at its highest level since 2018. As long as Crude is above this key former resistance around 65 the bias is higher and we're targeting the 2018 highs just above 75 over the near-term.
If and when price takes this level out, we think Crude Oil heads back toward 100.
That's right. The next stop after 75 would be the 2011-2014 highs in the low 100's.
Considering everything else we're seeing from risk-assets, as well as the impressive relative strength from Energy stocks of late, this wouldn't surprise us one bit.
In fact, JC and I joked on Clubhouse today that Crude Oil - probably more than any other asset in the world, tends to fool investors and do the "impossible" on a seemingly regular basis. A move from zero one year, to 100 the next, would be par for the course for Crude in our minds.
As such, not only are we in the camp that it does eventually trade back into the 100s... But, it likely does so sooner rather than later.
Considering risk assets peaked around the globe in 2018, think about what this action would mean from an intermarket perspective.
If Crude is able to reclaim its key 2018 highs, this would be another extremely bullish development and supportive of the global growth, higher rate, risk-on environment we've been pounding the table about.
Not to mention... can you imagine what Energy stocks are likely doing in such an environment!?
Speaking of economic growth and the reopening trade, it's hard to argue against these themes when you look at the chart of Steel Futures...
It's been a certifiable face-ripper. We like a lot of industrial metals right now, but considering the relative strength and favorable risk/reward setup at current prices, we think Steel is a great vehicle to use to bet on the space right now.
As long as we're above 1207 we want to own Steel with a target of 1728 over the next 3-6 months.
After all, the bigger the base the higher in space, right? If that's the case then Steel should have some serious legs here after a decade-worth of basing.
In this week's Top 10 Charts we shared another trade we like to express our bullish thesis on Steel. Here's what we told our Allstar Charts Plus members:
We like buying the VanEck Vectors Steel ETF $SLX on strength above 53 with a target of 75 over the next 3-6 months.
We think this setup is a steel at current prices... get it?
Let us know if you agree.
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