The 6.2% gap down decline from Wednesday to Friday is NOTHING compared to the beating I took in the Iraq War bombing down gap in 1991
The longs came back from their Thanksgiving Holiday with quite a surprise today, as Crude Oil opened on Friday 6.2% lower than Wednesday’s close.
As the saying goes … “You ain’t seen nothing.”
This price collapse reminds me of my absolute worst trade ever.
On 16 January 1991 I went home long Crude Oil. The price closed at $32.00. Remember, this is pre-24-hour trading. The U.S. started bombing Baghdad that evening — all of us “old guys” will never forget the footage from CNN.
I called London in the middle of the night — Crude Oil was trading up $2 on the Curb (us old guys will never forget Curb trading — it was an unofficial version of 24-hour trading). So I went back to bed and slept wonderfully well, fully expecting a big profit in the morning.
But, the morning came with a shock in what might be the most classic “buy the rumor, sell the fact” in history.
Rather than opening higher, Crude Oil at the NY Merc opened a full $7.50 lower — or $7,500 per contract. That was a 23.5% decline from one trade to the next. Ouch!!!! This was my worst trade ever.
You “newbies” to trading worry about overnight gaps. You do not know what overnight gaps are.