Dear Investor

In my last week newsletter, I wrote about Oil. Link: http://investmentacademy.wordpress.com/2010/09/22/quick-update-on-dollar-gold-indian-rupee-and-oil/

I want to update you on Oil strategy further today.

I believe, Oil would climb past $88 level in short period.

Technical Update:

Technically 2 scenarios are emerging:

A. Friday’s trend line breakout extends further and that can take Oil to $88 level

B. Oil can fall back and can find support at $72.50 and then heads up

In short, for Oil downside seems limited and upside potential seems more convincing

Caution: If Oil trades below $72.50, positions should be squared.

Fundamentals:
As I have written number of times, recent price rise in metals, commodities and bullions are more driven by currency devaluation than fundamentals or demand potential.

It seems Oil has yet not discounted dollar devaluation effect.

In year 2007, Oil went upto $140. Upon closely scrutinising, you would find not only demand but dollar devaluation,too, was a major factor.

In 2007, when dollar index breached 79 mark in Oct 2007,Oil was trading around $80. Dollar Index dived to 70 mark and Oil zoomed to $140 from that level in July 2008.

It is pretty clear that Demand alone was not driving Oil.

Same currency devaluation factor is into action now.

Check your Inbox for detailed article on Oil on Saturday.

Regards,
Dhaval
Investment Academy | Baroda | 098255 28815
Blog: http://investmentacardemy.wordpress.com/