Blimey, it's Feb 2009 all over again!

Imagine the scene: it's the summer of 2009, I have been monitoring the price of oil via the ETF US Oil,  watching it fall from a peak of $120 in July 2008 down to a low of $23 in February 2009, bitterly regretting having read all those articles about how inverse ETFs are dangerous and private investors should steer clear of them (like, 'please do not make the trade of the decade'!). Anyway, the past is the past and all that, onwards and upwards I tell myself. Then I get to the summer of 2009, and realise that the price of US Oil has risen to $40 (a 73% increase)! Flippin 'eck! I've just missed another opportunity!


2014 12 11 USO low Feb 2009

Back now to 2014: It's interesting to see that the price of US Oil fell further yesterday to $23, down 41% from just a few months ago. It is now at the same level that it was in Feb 2009! Is this another opportunity? Is it a 'value trap'? Has the price of oil shifted into a new paradigm? Whatever happened to 'peak oil'? Will it fall further? Is it a buying opportunity? Is this the beginning of the 'bend at the end of the trend'? I need a Delorean to take me back to the future!

2014 12 11 USO new low


Of course, nobody knows the answer to those questions. Prices and values are all relative. My house seemed incredibly expensive 20yrs ago when I bought it. Now I wish I had bought two! Some canny speculators realised that Feb 2009 was a buying opportunity for USO - look at the volume of trading at that time! The volume of trading of USO has risen again recently, admittedly nowhere near as much as back then. Yesterday I bought US Oil, and I may buy more if the price falls further. I am not spread-betting this: I don't want to get stopped out if the price falls significantly. I have simply bought the ETF and can just sit on it and watch the story unfold. A nice low-stress trade. (btw: this is not trading advice, this is just what I am doing. See my disclaimer)

You may be interested in another commodity trade. This time one that closed on me this week: coffee. I bought the ETF coffee as it started to rise at the beginning of this year and once it rose through its 50MA I set a trailing stop just below the 50MA which I moved up gradually. This week the price of coffee fell back and hit its stop loss, closing the trade and netting me a profit of 'only 28%'.

2014 12 11 Coffee trade


Will I feel gutted if the price of coffee rises sharply now? Of course! But I can always enter the trade again. The trailing stop-loss technique helps me to remove my emotion from the trade. Mostly I am the worst influence on my trading!


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