Tuesday, February 21, 2006

Time to Short OIH?

The oil services index (symbol OIH) is looking very enticing as a short.

Even though crude oil, and correspondingly OIH, have shot higher in the past few sessions, I am sensing the long-term uptrend (lasting years, to date) may be broken.

If you take a look at this intraday graph, you will see a triumvirate of reasons converging on why about $145 looks like resistance for OIH. First, there's the Fib retracement. Second, there's the neckline on the head & shoulders formation. And third, there's the descending trendline.


Options on this are heavily traded, so the bid/ask spread isn't murder. I'd get very serious about buying puts on this anywhere near $145 (with that price level as a stop-loss contingent order, if you want to play it safe).

4 comments:

Anonymous said...

Tim:
I was looking at the OIH before reading your comments, however I arrived at a bullish conclusion. Here's why: 1. A bear trap initiated due to the trendline breakdown and a quick reversal back above the trendline. 2. A look at the candlesticks confirm this short squeeze due to yesterday's long range down bar closing near the lows followed by today's open near yesterday's high and a follow through trend up day for a 100% trapping yesterday's bears. 3. This all occurred at the 50 day EMA which is where institutions like to fade pull backs. I do see the neckline on the intraday chart, which I'm glad you pointed out. Therefore, I may go smaller share lots (long) on HAL, Halliburton, if it breaks out of its bull flag with a previous cup w/handle support, support at the 50 day EMA as well as support at the 50% fib retracement level.

regards, Rich Obcena

Anonymous said...

If it's time to short OIH (for more than a few points) then you might as well short the whole damn market, starting with DIA and SPY. The only way will see a significant easing in OIH and oil stocks in general, is if the US and the world economy tanks.

P.S. Great Fox news web-link! How near-sighted the market has become!

Anonymous said...

Is it just me or are there a lot of broadening tops out there? Thanks for ASYT! Thinking about BBH Puts. What's your thoughts?

Tim Knight said...

Seems like no one even got a chance to 'sell into strength' since OIH has fallen right from the opening bell!

As for BBH puts, hard to say. It looks toppy, but not super clean. I've never had much luck trading BBH, so I'm biased.