Crude Oil

Oil a Value Buy?

November 26, 2008 By Chris 9 Comments

What should we buy?
Where should we place our money?
What are you doing with your investments?

It’s a question I get every week and one that is extremely difficult to answer but I will tell you what I am looking at:

Oil, pure crude oil

I understand that crude oil is down about 57% during the past six months and more than 43% over a one year period but I also know that the commodity is in demand. It’s in demand in the USA, Europe, Asia and everywhere else in the modern world. Countries such as the USA, China and India are not going to consume less oil as we move forward, regardless of the green energy movement (which I fully support). Traders will also return to the pit (computers) to speculate, so I see this as a very speculative vehicle (just as it has been over the past several years).

All the charts tell me the commodity is in a massive stage 4 down-trending base with the long term 200-day moving average facing down. However, oil will have several rallies that will bring it back towards the moving average based on simple supply and demand. I don’t see how a finite amount of oil will trade for less dollars per barrel in five or ten years than it does now based on an ever increasing world population and industrialized planet.

Therefore, I see oil as my “speculative value buy” for the next several years. My mutual fund if you will. Of course I will look for ideal technical setups that use favorable risk/ reward entries but I still view the play from a value perspective.

So, what will I be buying?

ETF’s are a great start; easy and simple to grab in your stock account with no futures necessary.

For long trends or bullish trends, I will buy:
(OIL) Goldman Sachs Crude Oil Total Return ETN
(OLO) PowerShares DB Crude Oil Long ETN
(DXO) PowerShares DB Crude Oil Double Long ETN

For short trends or bearish trends, I will buy:
(DOY) MacroShares Oil Down ETF (DOY)
(SZO) PowerShares DB Crude Oil Short ETN
(DTO) PowerShares DB Crude Oil Double Short ETN

[Read more...]

Filed Under: Crude Oil

SandRidge Energy (SD)

April 16, 2008 By Chris 7 Comments

I screened a stock on Monday named SandRidge Energy (SD) in a post titled, My Latest Stock Watchlist and noted that it made just about every screen I ran over the weekend. I looked back at scans from earlier in the year and it did make a few of them but didn’t grab my attention until now.

SD – 44.28, made almost every screen I ran this week (buy near $40)

Stock of the Day
Sandridge Energy Inc. (SD)
Monday’s Closing Price: YGE – $44.38

Sector: Oil & Gas
Industry: Oil and Gas Production
52-week Price: $28.50 – $45.40

SandRidge is an independent natural gas and oil company with its principal focus on exploration, development and production activities. The Company also owns and operates drilling rigs and a related oil field services company with focus on exploration and exploitation of its significant holdings in West Texas. SandRidge operates in four segments: exploration and production, drilling and oil field services, midstream gas services and other.

The stock recently logged a new all-time high on increasing volume as it broke-out above the ideal entry area of $41.15. Unfortunately for me, it broke out during the week of my vacation (and return). I can’t say that I would have bought shares but I am interested now. I understand that crude is selling at all-time highs and some people are calling for a top but I am not about to listen to them. Money is still to be made in this industry. By the way, SandRidge is in the #1 rated industry group as produced by Investor’s Business Daily.

Net income was 137% higher than a year ago (3rd quarter) with revenue increasing by 71% during the same time period. Natural gas and crude-oil production jumped nearly five-fold. Shares closed at $31.20 ahead of the 3rd quarter report; it has since given investors a 40%+ gain in a few months.

SD is starting to outperform a few of the top stocks in the top rated industry group, something I do make note of. For example, SD is up 24% YTD as the industry groups as a whole is up 18% YTD. As you will notice, SD shares company with some very respectable names (stocks).

Sister Stocks (Top Rated Industry by IBD):
Range Resources Corp – RRC
Continental Res Inc. – CLR
Quicksilver Resources – KWK
Bois D’Arc Energy LLC – BDE
Petrohawk Energy Corp – HK

Potential Trade Set-up:
Ideal Entry: $41.15
Risk is set at 1.0% of total portfolio or $1,000 of $100k
Stop Loss is 10% or $37.04 (breathing room to $36 is okay)
Number of Shares: 243
Position Size is $10,000
Risk is $4.12
Target is $55+ (based on future growth)
Reward-to-Risk is 3.36-to-1 with ideal entry; less with current price

Continue reading to see the impressive institutional numbers, general fundamental numbers and basic technical analysis that make this stock stand above other recent IPO’s. Net income, revenue, earnings and industry (global) growth make this an ideal stock for my watchlist. I am looking for young companies with increasing earnings and sales.

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Filed Under: 2008 Stock of Day, Crude Oil, IPO, Stocks

Snapshot Friday

March 14, 2008 By Chris 4 Comments

Interesting Chart Snapshots:

Filed Under: Crude Oil, General Market

US Dollar Snapshot

December 17, 2007 By Chris 10 Comments

Long Term Strategy on how to trade the US Dollar (it’s too simple for words):

Click here to open the US Dollar chart to a larger view (with more detail) of how accurate the 10-week/ 30-week moving average crossover signal (up or down) has been this decade.

Below is a chart of crude oil (the 10-week/ 30-week moving average crossover works just as well here):

Filed Under: Crude Oil, Currency

Leading Oil Stocks Diverge from Crude

July 30, 2007 By Chris 1 Comment

As crude rises, a majority of the market’s oil leading stocks are heading in the opposite direction. This is interesting and I really started to take a deeper look this weekend after Howard mentioned this on his “Time to Golf” post:

“Oil stocks are being murdered, despite robust per barrel prices. This tells me, someone wants to raise cash–in a very big way.”

I have owned and followed Petrochina on this blog throughout 2007 and can’t ignore the quick 10% correction it has made over the past couple of weeks.

All of the leading stocks listed below are making the same type of pattern correction as the price of crude continues to increase. It’s very interesting and I agree with Howard that someone big is selling into the strength. Other than that possible observation, I really don’t have much more to say on the subject so I will let the charts do the talking.