Oil Your Shorts
Wow, was that the rally? Maybe, maybe not. Perhaps it's just more basing behavior before we push higher.
Good bear that I am, I couldn't bring myself to go long. The bounceback seemed horribly flimsy. And with 8 points on the board at the end of the day it seems that, for today at least, the bulls haven't seized control back yet.
One relatively safe haven, I think, for shorts is in the oil services sector. Oil has obviously been on a tear for a couple of years, although this article in Forbes helps put it in perspective. But the per-barrel price of crude is sky high:
In spite of this, when I look at the oil services sector (in this case, OIH) I see a head and shoulders pattern shaping up. I must state once again that a pattern in formation is not the same as a completed pattern. One shouldn't normally jump the gun. But if you set your stops tight enough, this might be worth a look. It may seem hard to believe, but if the H&S pattern breaks beneath its neckline, the target zone is that area wayyyyy down in blue.
Let's look at what I think are some juicy opportunities in stocks related to oil. Many of these have puts available, or you could just do a straight short sale. We have Atwood Oceanics (ATW):
Cleveland Cliffs (CLF):
EOG Resources (EOG):
Frontier Oil (FTO):
Massey Energy (MEE):
Marathon Oil (MRO):
Petro Brasil (PBR):
SunCorp (SU):
If we continue lower this week, it will show the bears finally have firm control of the market. Otherwise, it'll be another passing of the torch and a bit more wasted time before the fall can start in earnest.
20 comments:
Often times the oil stocks & gold miners lead the commodities themselves. So if the XAU & OIH crash hard like you're talking about it won't
be long before crude & gold fall hard too.
When that happens the commodity boom has temporarily ended.
I'm beginning to think we're in for a period of deflation like Japan. If you take commodity prices out of the equation we haven't had much inflation
(health care and education costs are more strucutural problems within the economy - not due to inflation).
I've been watching the potential formation of a large head & shoulders pattern on the OIH as well, and it may play out that way. However-- with crude pushing record highs and the possibility of all-out war in the Middle East looming, I think you also have to contemplate the potential for a shorter-term inverse head & shoulders-type pattern to develop here. In this scenario, the June low would be the head, and today's low the "top" of the right shoulder, with a move up off this area needed to complete the formation. I could see it working out either way, but I do think it is a tad risky to be short oil with everything that's going on in the geopolitical arena right now. Minute to minute headlines could shoot the sector sky-high if traders smell supply being threatened. Either way, we should find out soon.
DOW temp bottom, or pause on the way?
That is the biggest question for today.
For those that haven't shopped for their August+ puts, it is probably a good time to look. Especially if the market sprints North like most peoples' guts are telling them. Hard to say how long this pause in the DOW will last, like the last couple lasting 7-9 days each. And which way will it break?
It should get over 10900 to complete the second sholder. But if there is enough catalist, it doesn't even need to do that and just drop to 10400-10500. If it does drop to that level, it will likely spring back up to 10700 right after.
I think Tony said it sometime recently, it may be Wed or Thurs before we see movement again. If it heads North, it makes for a really good technical bottom for the h&s to hit 10900-11000.
Continue to be impressed with the posts and the comments. Have these "guys" (not being sexist) been watchin all the right trends and doing their homework?
Few areas that look to show some strength: Financials - fed slow down?, utilities (agree - guess the yield bearing stocks are grabbing $$$; should have seen that coming), the rest looks ugly.
Any thoughts on where strength will come from in the NDX? Such a low for the past 12 month, can't believe it. Truely don't believe it can keep going down so hard.
I think we will get some news strength this week to close options expiration and build the momentum into selling. Best of luck all!
BIDU received the second upgrade/raised price target in as many trading days. I'd wait for it to show signs of rolling over before taking it short. The weekly chart suggests it may be heading higher near-term.
PB - did not say I was going to be long in financials, I don't want to be long in anything with this trainwreck ahead of us. My credit spreads are doing great and keep me growing.
Have to say the new proshare's ETF's that double the indicies up and short the indicies look outstanding.
Finding nice opportunities to put a few stocks when conditions present themselves. Looks like CME / GOOG may be ripe for a short term bounce (don't look to be good short candidates yet).
BIDU bounced off 2-month resistance today. Another line I drew takes it up to ~99, which it could hit tomorrow. If it does that, it will plummet back down - going off the patterns it has shown in the past. The head will be formed, though on the candle-stick chart it will look like a pin-head.
GOOG may go up all week, but max I think it will hit is 415, unless it is strong enough to double-top.
CME is interesting for a very-short low long - top may hit 480, unless it gets some (buffalo? - well, related to cows...)wings for a double-top.
Hello Traders!
This is my first post to a blog...
GRMN: Filed a Def 14 with the SEC so they are set for a stock split soon. They are showing unusual strength in this market so I would set a tight stop.
Gold: Anyone know of Gold, Oil, and Silver ETF that have options?
Prosperous Trading!
Chris
Mark-- Resistance on BIDU is at 94.03, the June high, which it hasn't quite tagged yet. I had been watching for a head and shoulders pattern to complete, with the neckline around gap support, but Monday's move and close near the high is above right-shoulder height. It may have trouble around $94.00-- but shorting something just because it is up a lot and "bucking the trend" very often backfires. They also have earnings next week, which I believe are expected to be strong. I'll be watching the $94 resistance area closely. Best of luck.
PPI figures came in fairly high today. Not a good sign for manufacturing.
And don't think for one minute that the higher PPI won't lead to higher CPI. It's inevitable.
The bear isn't turning anytime soon. Might be a good time to start scaling into some of the PSQ or DXD positions.
-Tony
tony i follow ETFs left and right, i knew when profunds came out with ETF they were suppose to release 12 but only did 8, now I know what the other 4 are. this is kick a$$.
DXD
QID
SDS
MZZ
think ill be buying some SDS
sad rally. yhoo reports tonight, if they disappoint expect nasdaq 2000 tomorrow.
market is extremely weak. I think the s&p goes to 1150 before we see somewhat of a bottom.
i would refrain from new shorts for the indices this week ... they look poised for a bounce ... most likely to the 50 dma
Well, the Dow just broke through support. We'll have to validate it on a closing basis today, but the volume has definitely picked up to the downside and right now the index is at 10,687. The S&P is in no-man's land right now at 1,226.
The tone of the market is decidedly negative. Without price support, there can be no trading. It almost looks like people are getting out of the market at all costs. The big players have decided that it's time to get out and stay out for a while.
I'm pretty sure that even tomorrow's CPI data won't save the market at this point.
Interesting development. I would never have guessed that today's action would be so negative so far.
-Tony
I think when everyone is totally negative it might be time to buy, im seeing that today, after tomorrow cpi I think it may be time to get in, the federal reserve is going to raise rates .25 on august 8th so this news is not anything new. However a pause is what investors want at the 8th meeting, if they dont get it the markets are going to tank.
Naturally, the INSTANT that I wrote that message, the Dow rose from 10,687 to 10,719. The bulls are looking to put a small rally together, it appears.
Go figure.
-Tony
wowwwwwwwwwwwwwww
I think this rally could be a 1-2% rally especially if the data tomorrow is in line along with yahoo earnings tonight.
looks like we are bottoming ...
Just out of curiosity, is anyone here really trading with a large percentage of their portfolio??
For example, in my case, I've got probably 60% of my money in a managed portfolio (mainly funds), 30% in fixed-income investments (mainly CDs), and I'm only playing around with 10% or less of my overall portfolio for trading purposes.
What that does, of course, is leave me wide open to the broad market crash in a large portion of my portfolio, but I've hedged it with a goodly amount of fixed income stuff. The rest is just gravy that I'm playing with. I guess that makes me a "net long" in the market, but I'm actually quite bearish on equities (and bonds, for that matter) at the moment. But hey, you name it, gold, oil, metals, stocks, bonds, whatever... they're ALL going down right now.
Is anyone really serious about their money and playing with a larger percentage? I couldn't imagine working with (and risking) large amounts of capital on the daily swings in this market.
Just thought I'd ask.
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