EIA data was released at 10:30 am ET.  Oil inventories fell by 0.91 million vs. consensus of 1.9 million.  Gasoline inventories had a build of 0.63 million vs. consensus of draw of 1 million.  Distillate inventories had a build of 0.15 million vs. consensus of no build.

There is no change in our stance on oil.

For your convenience we are reproducing the section on oil from the Morning Capsule.

Oil

Oil experienced a short squeeze going into the close at 2:30 pm ET.  At 4:30 pm ET API data was released.  It showed oil inventories fell by 5.2 million barrels vs. 1.9 million barrels consensus.   Oil crossed $50 on this bullish data.

Zones

Short zone is $11.80 to $12.23. Stop zone is $12.81 to $13.17 for one-third of the position,  $13.52 to $13.88 for another one-third, and a mental stop over $14 for remaining one-third.  Those not willing to take the risk of these stops may want to reduce the quantity before the Brexit vote, pleas see ‘Caution‘ below.

Inverse ETF

Those who prefer not to go short can consider going long inverse ETF SCO.  Keep in mind that SCO is a double leveraged ETF.  For this reason consider reducing the quantity by one-half.  For details on quantities please see prior posts.

What To Do Now

Those in oil may consider continuing to hold  and consider adding 15%.

Those not in oil may consider scaling into a short position in USO in the short zone.  All but most experienced investors may consider staying away from oil futures due to very high volatility.

Caution:  This is suitable only for aggressive investors as the risk of loss is high.  There is also some risk ahead of Brexit.  If the vote is ‘leave’, some analysts are predicting a $10 drop in oil which would be good for this short position. However, if the vote is ‘remain’, there is a potential of a rally of $0.50 to $3.00.