POTENTIAL ISLAND

REVERSAL ON CRUDE

Of course in a perfect world i would be able to tell you the actual date time and downtick but sadly that is not the case. However we had an interesting day yesterday on crude oil which in NY trading opened on the high tick making a new all time print high of 139.89 and then sold off and closed just off the lows of the day. Note on the chart that the USO (Crude Oil proxy) has been trading outside the main channel ever since it gapped up 2 weeks ago on that one day spike to 139. If we can get a gap down open today we could complete an iisland reversal formation which is a very bearish pattern.

Meanwhile no sign of a top in the Natural Gas chart (UNG) which is still locked in a solid uptrend.


All of this action seems to be co-inciding with a potential double bottom formation in the Ultrashares Double short oil and gas (DUG) which follows the Dow Jones Oil and Gas index (DJUSEN). Sometimes the crude and the equities don't move in line but the signals are interesting.

And yesterday's news on Linn Energy where it sold some notes to pay down debt was met well by investors which took the stock up to 24.50 and the chart in my view continues to signal higher prices ahead.


The mlp index finished yesterday with just about a 2 point gain. We seem to be in this period of just boring sideways action with the occasional news item moving an issue here and there. We did get some news after the close yesterday on Atlas Pipeline Partners (APL) which is undoing some hedges and increasing estimates for distributable cash flow for the rest of the year. Since the company last year told us about possibly taking the distribution to 4 dollars annaul it would put the stock at a 10% yield. Should be a bullish driver. Magellan Midstream Partners (MMP) is settling a case with the EPA. The stock has languished lately as it settled above 36 yesterday.

Crude at this time is down 1 dollar as we approach the NY open. This could be the day we break the uptrend...short term that is. Stock futures are stronger this morning as it rallies on the back of Europe and ahead of Goldman Sachs and Producer Prices due out at 8:30am. This is an early post so i will be putting up any headlines as they break.