- How to Trade Oil This Month

Stock Ideas

Investing Ideas

How to Trade Oil This Month

Market Watch

A few years ago my friend made about $4 million dollars by investing in the video game company Midway. Midway at the time ran from about $3 to over $20!!
More...

Login Form

How to Trade Oil This Month

Tuesday, 16 October 2007

By Jeff Clark
Along with Halloween candy, Pilgrims, and Rudolph the red-nosed reindeer, there are three things I count on showing up in the fourth quarter every year...

Bears in the diet company stocks.
Bulls in the semiconductors.
And a glut in oil and gas inventory.

Nobody ever questions me on numbers 1 and 2. After all, it makes perfect sense that the weight-control businesses suffer during the holidays when no one wants to be on a diet. And semiconductor stocks move higher because, well, just about everything moves higher in the last quarter of the year.

"Super Spike" Analyst Gets the Last Laugh

Arjun Murti is getting the last laugh. And just who is Arjun Murti? He’s the Goldman Sachs analyst who called for an oil “super spike” more than three years ago.
+ Full Story

Ian Wyatt's Top Stock InsightsReviews

Fellow Investor, The S&P 500 is doing its darndest to convince investors that a bottom was hit when Bear Stearns went belly up in mid-March. Twice the S&P went down to test 2-year lows -- to...
+ Full Story

As strange as it may seem, oil prices have a habit of declining when the weather turns coldest. Chalk it up to the market's discounting mechanism. Oil prices rally in August and September in anticipation of cold weather in the winter.
When winter arrives, the market begins to discount warmer springtime temperatures and oil prices fall.
Oil company stocks don't demonstrate the same tendency, so there's no point in trading it from that angle. But, take a look at this chart of the U.S. Oil Fund (USO)...

But to expect a glut in oil and gas inventories just as the weather turns colder? That seems crazy.

And if you believe as I do that there are a few too many bulls hanging out in the oil pits, then shorting a few shares of USO looks like a reasonable bet.

In fact, it's pretty tempting to short the diet stocks, buy the semiconductors, short USO... and then go to sleep until Thanksgiving.

There's no guarantee that oil prices will decline toward the end of this year. But it's happened in five of the last six years – the lone exception being in 2003, when oil prices dropped briefly but then rallied higher.

Odds are that it'll be a pretty profitable nap.

Best regards and good trading,
Jeff Clark
Source Excerpted from : Growth Stock Wire

We endeavor to decipher analysis of this Teaser/News Letter to distinguish the thoughts of Authors/Editors.
Please post your Review/Comments, your rating helps other users gauge the value of an article ...