by Jeff Clark, editor, Market Minute The price of oil is free falling. The gooey black stuff was trading near $54 per barrel just three weeks ago. It closed Friday at $41.28. That’s a horrendous decline. And, it highlights the importance of constantly monitoring the risk and reward potential for trades… and cutting trades for small losses when the risk becomes too great. The last time we looked at oil, the price had just fallen below $51 per barrel. That broke an important support line. And, since the next support was all the way down at $42, the risk of any bullish oil trades had become much greater than any potential reward. So, I suggested it was time to bail on the trade. Oil rallied right after we published that essay. Then… it dumped. Here’s an updated version of the oil chart we showed you last month… 
Oil ended on Friday sitting right near support at about $42 per barrel. News over the weekend – that Saudi Arabia has gone into “full production mode” – has oil trading closer to the $34 level. If it breaks below this level, then the next support comes in at $26. That’s where oil bottomed back in February 2016. And that was the lowest price for oil since 2003. Oil was quite oversold on Friday. If the overnight decline holds until the opening of trading this morning, then oil will be trading for about half the price at which it started this year. And it will be more oversold than at any other time over the past four years. From a risk/reward perspective, oil is likely to look like a pretty good trade this morning. Admittedly, it isn’t easy to buy anything that has fallen as fast as oil has. But, if you stopped out of the oil trade and took a small loss back in February, then you have a much better opportunity to establish a new long position in oil on this recent decline. Best regards and good trading, 
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