Is oil a bubble?

Above is a chart of the USO. We had earlier ranted on snotwheel.blogspot.com (whom we owe a lot of our TA learning to) about the odds being against oil.

Shown in the chart, is the action that shows the result, which is the breakdown of the steep channel. This breakdown, only indicates that oil's climb was too steep to sustain. But nevertheless, it can still climb. Analogy time, this is akin to an athlete's pace in a marathon. The peak running speed cannot be sustained, nevertheless there is still gas left for a sustained slower pace.

Deceleration in a stock's growth happens in stages. The green line will surely serve as support once. We believe oil will drift higher next week, whereby it will be poised to drop another time, ,probably, piercing through the green trendline this time. This could coincide with a push on the DJI higher.

We believe the gentler purple line, around 85 (now) will hold in the long term. This line has a slope of ~20$ per 5 months, thus yielding a conservative estimate for the price of oil (barring unforeseen discoveries etc.), of > 135$ by year's end. We also believe that the story of commodities runs somewhat parallel to this one, but that is a story for another post.