December Crude Oil is up 10 cents this morning at $81.29 as I write. The enclosed chart shows that December Crude Oil has broken out to a strong up trend. The directional movement indicators are bullish and the ADX line is rising. The longer term weekly charts which I sent out yesterday, shows that crude oil is in the process of a major move to the upside even though it seems as if fundamentals are bearish. The only problem with that idea is that fundamentals seem bearish in the US, but you have to also remember that countries like China just reported an 8.9% growth in their GDP! China just announced car sales there of 1,000,000. Somebody is using fuel, it may not be us, but overseas they are. The weekly chart break out measures up to $120 within a year. We have a growing profit in the $74.50/$80.00 call spread and I will be watching for signs to take profits. The $82.00/$87.00 ratio call spread is waking up as well.

Followers of this letter should have the following positions:

Long one December Crude Oil from $72.30

Short one December Crude Oil ($73.00 strike) call option from $4.25

Long one December Crude Oil ($74.50 strike) call option from $4.18

Short one December Crude Oil ($80.00 strike) call option from $2.08

Long one December Crude Oil ($82.00 strike) call option from $2.49

Short 2 December Crude Oil ($87.00 strike) call options from $1.32 each.

Long one December Crude Oil ($62.00 strike) put option from $2.11

Short 2 December Crude Oil ($58.00 strike) put options from $1.23 each.

There are 25 days left until option expiration.

Oct. 23, 2009
David Hall