Top Crude lesson

It is somewhat hard to imagine that less than a year ago Crude Oil was $145 a barrel. At that time the "Analyst" were giving targets of $200 Crude. Fortunes were made and lost on this parabolic run culminating into $35 crude.
To bring home a lesson with 20/20 hindsight, lets look at the Crude Continuous Future contract. Changes in OI (Open Interest) reflects the rolling of the monthly contract. Point to note here is the trend of OI and Volume at any given time period. Notice how at the end of May 2008, OI was declining and Volume was rising. Previously OI was peaking at about 390K; by end June 2008, OI peaked at 315K, making a lower high. This is a sign of topping formation and distribution.
Crude subsequently peaked in July 2008. A lot of people who believed the "Analyst" call for $200 Crude were left hanging into the top. Indeed the informed/savvy player left the last few dollars of the long side profits on the table. It was a smart move on their part.I know it is hindsight. But if one can watch for this pattern in the future and not get drowned in the market noise, this hindsight lesson can be of forecasting value!

One can see from the daily chart that Crude has been basing since the start of 2009. More recently it has been in a channel between $54 and $48. The OI did go up to 390K in January 2009 but has been trailing since then. Lets see if the OI can again go back to 390K with high volume. That will be one of the indication of a bull trend. If that happens, the channel will be broken and price will trade North of $55. Catching and successfully following a trend can be very profitable but the clear lack of trend can present swing trading opportunities.

CL 1600 daily