Last week, oil rose $0.60 to $69.14, while OIH (Oil ETF) rose $2.55 to $180.20 after a volatile week. Currently, OIH is severely overbought with the weekly RSI and ULT (above price chart) both above 70, and the weekly MFI (below price chart) above 90. MFI is the Money Flow Index. The following is a StockCharts.com statement on MFI: "The MFI can be interpreted much like the RSI in that it can signal divergences and overbought/oversold conditions...A stock is considered "overbought" if the MFI indicator reaches 80 and above (a bearish reading), or a bullish reading of 20 and below suggests a stock is "oversold." It's very unusual, particularly for an ETF, that MFI has stayed so high for so long (i.e. above 80 for 10 weeks). So, it seems, a pullback is in order.
Chart courtesy of StockCharts.com
Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.
Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.
