Decoding Herd Mentality Psychology in Crude Oil Market
Updated Aug 2023
While we prioritize sharing the latest updates, we also maintain a record of past developments to provide a historical backdrop for our discussions. For enhanced clarity, dates are positioned alongside the most recent entries. As of August 2023, this article is current.
Herd mentality psychology is at play in the oil and energy markets. Not long ago, this sector was one of the most sought-after, but with the rise of AI mania, anything outside of this sphere was suddenly deemed a secondary investment. However, to everyone’s surprise, the energy markets, precious metals, and the commodities sector are poised for a comeback.
The consolidation process is progressing slower than initially expected; however, the oil market is gradually gaining momentum for an upward movement. Based on the current outlook, oil is poised to challenge the 90-100 range and trade as high as 140 before topping out.
The initial level of resistance becomes relevant within the 83 to 84 range. Should there be a weekly closure at or exceeding 84, it is likely to trigger a trial of the 99 to 101 range. Now, if crude manages to conclude a month above 108, the path towards testing the 140 range, which hasn’t been seen since July 2008, becomes a distinct possibility. In this phase, savvy investors are advised to consider establishing positions in oil producers, drilling companies, pipelines, and other sectors directly linked to the oil markets. It’s worth noting that Warren Buffet’s ongoing accumulation of shares in OXY underscores this strategic direction.
Herd Mentality Psychology at Play in the Stock Market
Aug 2019 Update
It takes zero effort to panic, and the reward is precisely zero; those that panic in the face of adversity are given what they deserve in terms of the market, which means less than zero, as the masses always sell at the bottom and buy at the top. The astute individual that does not panic walks away with a considerable reward, and that is how it’s been for millennia, and nothing will change for another 1000 years.
There is no law or set rules for the markets other than being able to adapt to a given situation. We deal with emotions, and chaos is set free when feelings talk. And that is why like cattle, the lemmings always stampede when the markets sell-off. The masses also tend to jump in when the markets are about to crash. Hundreds of years have passed since the Tulip Bubble, and nothing has changed.
The markets are volatile (Sept to Oct period), and the crowd tends to overreact to the news. Remember, every disaster becomes a disaster because the masses were conned into believing a false narrative. You say no way; how come reacting to disasters pays so poorly? The stock market is the best barometer for disaster-prone. If disasters paid off well, the Dow should be closer to zero than 27K.
Herd Mentality Psychology In-Play
One thing you should never do is listen to fools who scream that the world is going to end or a market is going to continue crashing forever. Some markets are more manipulated than others; there are no such things as free markets today. So you need to accept that and move on. Watch the Video towards the end of this article, where the brain surgeons predict that oil could now hit $10.00 a barrel. What is interesting is that in most cases, these same naysayers were stating that oil would continue soaring higher when it was trading over $100.00
Instead, please focus on the mass Psychology aspect of things; when everyone is gloomy, it is a sure signal that a bottom is close at hand. This is what we had to say in February of this year. The content below is extracted from the market update sent out to our paid subscribers.
Nothing much to add here other than the projected outlook has come to pass. Oil should not close below $30.00 on a monthly basis to indicate a tradable bottom is in place. The move to new lows suggests that another test of the lows is possible, with a strong chance of overshooting to the 23.00 range. Market Update Feb 17, 2016
Herd Mentality Psychology: Don’t Listen To Experts
From a pattern perspective, oil has fulfilled the projections of putting in a bottom in Feb; after dropping down to the $26.00 range, it is up almost 20%. However, until the trend turns positive, the lows could be rapidly tested again with a possible overshoot to the 23.00-24.00 ranges, after which another fast reversal should take oil above 30.00. Notice that the $30.00 price point level has held on a monthly basis.
Oil has not closed below this critical level on a monthly basis for two months in a row, and this has to be viewed as a very bullish development. Our overall view is for crude oil to trend higher, possibly trading past the $55.00 range. In the face of extreme negativity, oil is reversing, just as it collapsed in the face of Euphoria. A weekly close above 35.00 will set the foundation for oil to trade past the primary downtrend line and, in doing so, send the first signal for a move to the $50 plus range. Market Update Feb 29, 2016
Now to the Video making a case for $10.00, which sadly will not come to pass anytime soon; we don’t expect oil prices to trade up forever; in fact, renewable energy will displace oil in the near future. As early as 2020, the cost of an electric car could be comparable to that of a Petrol-powered car.
Other Interesting Reads:
Oil Supply Outstrips Demand: Oil Headed Lower 2016
Oil Crash: Crude oil price heading lower 2016
