Notice how the sector has sold-off from the highs of late last year. This may be the type of blow-off the industry needed to clear out the dead weight. The index has pulled back to within the Fibonacci retracement levels (roughly between 38% and 62% of the preceding rally).
Here's a chart of oil -- actually the OIL tracking stock.
A break-out about $60/bbl for oil or $37 on the chart could signal a new upswing. If that happens, oil will become more profitable making the energy sector more attractive.
This strategy is based on oil. So wait for oil to move above resistance by at least 2-3%.
3 comments:
A break-out about $60/bbl for oil or $37 on the chart could signal a new upswing. If that happens, oil will become more profitable making the energy sector more attractive.
If that is the case, then you'll probably need some type of catalyst to make this break-out for oil to happen. Got any ideas? A U.S. air strike against Iran perhaps?
Remember, the aircraft carrier Stennis is only a week and a half away from the Persian Gulf. And we still have the Eisenhower in that region as well.
The catalyst could be something as simple as a trader making a bid, although we do have the following possibilities.
1.) More problems in Niger.
2.) OPEC making another production cut.
3.) Any news the India or China GDP growth is faster than expected.
4.) A continued amount of news showing the US economy isn't near a slowdown, which would mean oil demand would be higher.
I don't see supply meeting demand unless we DO slip into recession. Mexico's Cantarell oil field is crashing by a 15% rate. While actual shortages in the West are unlikely, shortages in the 3rd world are becoming more and more apparent.
I think a longer term (5 or so years) in an oil production stock that isn't BP would give a large return. I don't think refiners such as Valero will necessarily be able to profit from higher crude prices as much as the producers will.
Also, there's a continuing shortage of drilling rigs and offshore rig manufacturing is booked for years to come.
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