Steve Barton: Oil's New Price Floor, Plus Gold and Silver Targets

Key Concepts

• Technical Analysis: Using chart patterns, moving averages (MA), Fibonacci retracements/extensions, and RSI (Relative Strength Index) to time market entries and exits.
• Shoulder Season: A cyclical period in commodity markets (specifically coal) where demand and prices typically soften.
• Strategic Petroleum Reserves (SPR): Government-held stockpiles of crude oil used to stabilize supply; their depletion is a key fundamental indicator for oil prices.
• Bull Pennant: A technical chart pattern indicating a period of consolidation followed by a continuation of an upward trend.
• 10-Year Yield: Referred to as the "price of money," serving as a critical indicator of bond market health and Federal Reserve policy control.

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1. Energy Sector Outlook

Oil:

• Fundamentals: Despite short-term charts suggesting lower prices, Barton argues for a bullish long-term outlook. He cites the "choke" on global shipping (Strait of Hormuz) and the depletion of global SPRs as primary drivers.
• Price Targets: He believes the days of $55/barrel oil are over, suggesting a new floor between $80–$85.
• Strategy: Rather than selling oil stocks, he suggests selling covered calls to generate cash while maintaining exposure. He also recommends rotating into oil services companies, which are positioned to rebuild damaged infrastructure.

Coal:

• Market Status: Currently in the "shoulder season," which Barton describes as potentially the "shoulder season to end all shoulder seasons."
• Investment Vehicle: The COAL ETF is identified as the primary vehicle for exposure.
• Entry Points: He views the current price as a buy zone, with $22.50 identified as a "screaming deal" support level.

Uranium:

• Strategy: Barton views uranium as a play for energy independence. He suggests using SRUF (physical uranium) or URNM (leveraged ETF).
• Methodology: He emphasizes that these are cyclical assets that must be traded (buying at support, selling at resistance) rather than held indefinitely. He sets a target entry at $60 for URNM with a take-profit target at $85.

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2. Precious Metals

Gold:

• Technical Support: Barton identifies $4,100 as a critical support level, noting it aligns with the 200-day moving average and a 38.2% Fibonacci retracement.
• Outlook: He anticipates another 1–2 months of weakness before a potential bottom.

Silver:

• Technical Support: He highlights $55 as the "back up the truck" moment. He notes that this level is a widely watched historical resistance point from 1980 and 2011.
• Risk Management: If silver sustains a break below $50–$55, he would consider his thesis invalidated and would exit his positions.

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3. Industrial Metals: Nickel

• Pattern: Nickel recently broke out of a "bull pennant" pattern, which Barton notes has a 70–80% success rate for upward continuation.
• Application: He remains bullish on Centurus Metals and Magnum Mining, noting that the market has not yet fully priced in the breakout of the underlying commodity.

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4. General Market & Macro Indicators

• S&P 500: Barton expresses skepticism regarding current all-time highs, labeling the market sentiment as "happy talk" disconnected from the geopolitical reality of ongoing wars. He identifies resistance at $7,400.
• 10-Year Yield: This is his primary concern. He describes the chart as a "textbook bull flag" breaking out. He warns that if yields break above 4.5%, they are likely headed toward 5%, signaling that the Federal Reserve may be losing control of the "price of money."

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5. Synthesis and Conclusion

Barton’s investment philosophy centers on cyclical trading rather than passive "buy and hold" strategies. He advocates for using technical indicators—specifically 200-day moving averages and Fibonacci levels—to identify entry points in commodities that are currently experiencing seasonal or temporary pullbacks.

Main Takeaways:

• Avoid: The general stock market (S&P 500) due to lack of fundamental support.
• Accumulate: Gold, silver, and coal miners during current periods of weakness.
• Monitor: The 10-year yield as a leading indicator of broader economic instability.
• Action: Use covered calls on oil equities to hedge while waiting for long-term price appreciation.