August 19th, 2010 | 
Author: 
I just want to make this clear. I have never been paid to promote a stock/company, and I never will. All of my picks, analysis, alerts, and posts are crafted utilizing my own knowledge and experience. Although I have been approached by company’s to profile their stocks for a fee, I have declined them. I have never been compensated to write on this blog, aside from advertising revenue.
If I feel a company merits the exposure I provide then I will cover them within my blog, for free.
I do not think there are sites covering the penny stock market that can say the same thing. My posts are unbiased and honest. I call out the scams and I point you toward the big gains, as evidenced by my last stock pick which soared over 3,000% from $.0008 to $.0265.
Thank you for reading and I hope what I write helps you navigate a very dangerous, but potentially prosperous, penny stock market.
I just want to make this clear. I have never been paid to promote a stock/company, and I never will. All of my picks, analysis, alerts, and posts are crafted utilizing my own knowledge and experience. Although I have been approached by company’s to profile their stocks for a fee, I have declined them. I have never been compensated to write on this blog, aside from advertising revenue.
If I feel a company merits the exposure I provide then I will cover them within my blog, for free.
I do not think there are sites covering the penny stock market that can say the same thing. My posts are unbiased and honest. I call out the scams and I point you toward the big gains, as evidenced by my last stock pick which soared over 3,000% from $.0008 to $.0265.
Thank you for reading and I hope what I write helps you navigate a very dangerous, but potentially prosperous, penny stock market.
I have received numerous emails the past few days noting how VCTY is about to run to new highs. While I try to remain cautious I do think the potential is there to break the $.036 high. When I made VCTY my stock pick earlier this year at $.0008 I envisioned this stock getting some value put inside it. It turns out the value I envisioned is becoming tremendous value. I am hearing $200 million worth of assets could be coming VCTY’s way. Now that is shareholder value.
I think VCTY bears watching going forward. Not only will it make a great short term trade, but longer term it could prove to be very profitable.
Cement Creates Strong Foundations For Growth
You think the USA or Europe construction industries have strong enough foundations to put your money on right now? I don’t after another increase in USA unemployment last Friday and more important the future of potential increases of jobs and GDP. This week I’ve got a short sell on CRH Plc. It’s a big ADR based in Ireland involved in cement and construction products that sells half of its products in the USA. The stock has already been in a downtrend, and I’m betting it will continue further down for the time being to provide a low-risk high-reward profit here.
For the time being we’ve got some strength in the Dow Jones Industrials, with the S&P500 trying to follow. I don’t think it will last long until prices are headed lower again. Same for the Nasdaq.
Last Fridays Jobs Report
Last Friday traders were watching the S&P trade action like a Hawk that traded below its 200-day moving average of about 1,115. The price move lower seemed to be mostly due by the Friday’s jobs report that showed another 100,000 plus jobs lost. Buying the dip that has happened recently looks to me as a high risk low-reward idea right now. Maybe the buy the dip idea would work if the financial stocks led the way, but most of the big boy investment banks failed to rise above their 200 day moving average on Friday. Technically, the market looks down, fundamentally it could be up, but it doesn’t look like that to me currently.
Goldman Sachs, Congress, and More Fiscal Stimulus?
There is some strength in the market, but it looks to me shallow at best and the way to play this week and next is to get ready for short sell trade setups in the stocks. After Friday’s job report, Goldman Sachs was out talking about decreasing their expectations for USA economic growth. To get GDP increase you need employment increases and then what is Congress going to do or most likely not do to get the economy growing stronger with more jobs growth? Is corporate USA or small business going to add jobs? I don’t think so just yet. Congress has so many issues to deal with right now, you think they’re going to get something going like with more economic stimulus or wait until the Congressional elections are over? USA business is most likely to keep its balance sheet tight for the time being by not hiring new people just yet. Even if Congress did approve another fiscal stimulus, it may not work, like the last stimulus didn’t work too well it seems.
My Stock Pick This Week
Is CRH from Ireland. It’s an ADR on the NYSE valued at about $15 billion. They’re involved in Cement and construction products. I would be a buyer of this type of company in Asia, but in the USA and Europe markets right now, I don’t think so. USA and Europe have to downsize still while Asia as a whole is playing upsize catch up as they have been this decade with their stable and positive economic growth rates which I attribute to some help of “smart money” around the world being invested there.
CRH gets about half of their profit from their operations in the USA. They recently said that earnings are slowing. Do you see a pickup in USA construction this year? I don’t. CRH said are things got harder for them the first six months of 2010 as Europe sovereign debt defaults still linger and with the USA economy getting softer and softer. No matter the good or the bad CRH says, the bottom line for me, the forward fundamentals show no significant growth yet, and the chart tells me the story for now, so I’m selling it.
Sell Short CRH – Ticker CRH
Sell Entry: 22.14 to 23.23. Watch for some uptick this week to sell it.
Stop-Loss: 24.28 or 8% from your entry point.
Take Profit Targets: 19.30 to 18.93, 17.48 to 17.16, 15.28 to 14.95, 11.58 to 11.36
CRH Company Profile
CRH public limited company, through its subsidiaries, engages in the manufacture and supply of building materials worldwide. It provides cement, aggregates, readymixed concrete, asphalt/bitumen, and agricultural and chemical lime materials; architectural and structural concrete products; clay products, such as clay facing bricks, pavers, blocks, and roof tiles; and building products, including construction accessories, building envelope products, and insulation products, as well as offers transportation, construction, and paving services. The company also produces concrete masonry and hardscape products, packaged lawn and garden products, and prepackaged cement mixes; precast, prestressed, and polymer concrete products, as well as plastic box enclosures; manufactures and installs modular precast structures for use in structures, such as hotels, apartments, dormitories, and prisons; and concrete pipes for use in storm and sanitary sewer applications. In addition, it provides architectural glass products comprising insulated, spandrel, laminated, security, and sound control glass products; engineered aluminum glazing systems products consisting of storefront and entrances, curtain wall, skylights, and architectural windows; and welded wire reinforcement and fencing products. Further, the company markets and sells supplies to the construction sector and to the general public through professional builders’ merchants stores and Do-It-Yourself (DIY) stores. As of December 31, 2009, it operated 663 builders’ merchants stores and 241 DIY stores. The company was founded in 1949 and is headquartered in Dublin, Ireland.
Click the CRH stock chart below for a larger view.
China Southern Airlines Sale Promo
Flying high with China Southern. Long term I’m bullish on this company. Short term I’m short selling it, and hopefully buy in at lower prices.
The Market This Week
Corporate earnings reports will be in the spotlight this week, and the European banks stress test is over. I see the market inching higher this week, but now grinding into a concrete wall of resistance at 1113 to 1154 on the S&P500. If there is a continued uptrend past 1154, possibly the uptrend can continue, but I will be watching closely for low-risk high-reward short sell trade setups at these levels, and am already this week with a short sell on China Southern Airlines Ticker ZNH
The European bank stress tests are done now, and trader’s investors will be looking at the new earnings reports coming out this week, and the weekly economic data reports that could put pressure on those positive earnings reports. On average this quarter S&P 500 profits are up about 40% from their estimates. I caution not to put a lot of weight on the increase from estimates as earnings estimates are very subjective analyst to analyst as they are adjusted up and down in different market conditions that put more skew into a company’s forward earnings than good information to make a low-risk high-reward forward bet on in my experience.
This week’s earnings reports of note are Aflac, Boeing, BP, Dupont, Exxon Mobil, and Visa. Even with the positive earnings reports so far, I’m suspicious of a resumption of an uptrend to any great degree with the earnings reports battling with the stream of economic data that could easily disappoint the market in the coming week. During my stock scans this week, I mostly saw low-risk high-reward sell setups than buys. Still, I see the market grinding higher this week, with the end of the week or next week more definitive on if it wants to continue higher or reverse back to the downside.
Gross Domestic Product
GDP forecasts range from the Fed at 3.5% to 2% by Goldman Sachs, and 1% by others. Unemployment is terrible and should continue to stay that way for the time being even though the positive employment spin doctors are doing their best to be upbeat, at least until the congress elections coming up. Maybe the new politicians have got a solution for the USA labor market woes, but I would bet against it right now.
My Stock Pick This Week
Is a sell short on China Southern Airlines. With China is slow down mode for them, but still huge growth for the rest of the world, I see possible continued pressure on the China economy. I think the big pressure on China stocks right now is because they depegged their Yuan from the US Dollar now. The Yuan should rise significantly in the long-term putting pressure on China stock price growth for time being. Of course, select China companies will keep growing strong and outperforming the market so watch them like a hawk for buy in opportunities.
China A Shares – Hong Kong H Shares Premium Differential
One significant thing about the China and Hong Kong markets is that there has been some talk recently about the decreasing premium in the prices of mainland China listed stocks compared to the Hong Kong listed shares of the same companies. The markets have been surprised that after years of China’s “A shares” costing significantly more than the “H shares”, actually more than twice as costly in the beginning of 2008, now suddenly stocks trading in Shanghai are cheaper in some cases and now most of the prices are now virtually even. This is not to say that China A shares are a solid buy just yet, as they could swing to the negative as much as they did to the positive in 2008 compared to the Hong Kong H shares. Pay attention to that correlation, as it speaks volumes about what the social mood is there, and risk appetite in the Asia region.
Sell Short China Southern Airlines – Ticker ZNH
Sell Entry: 24.58 to 22.74
Stop-Loss: 8% from your entry price
Take Profit Areas: 20.05 to 19.71, 19.21 to 18.86, 16.50 to 16.19
China Southern Airlines Company Profile
China Southern Airlines Company Limited operates an airline in China. The company principally engaged in the provision passenger, cargo, and mail airline services. It also provides logistics services; air catering services; pilot training services; property management services; aircraft and engine repair and maintenance services; flight simulation services; and airport ground services, as well as sells duty free goods in the flight. As of December 31, 2009, the company had a fleet of 378 aircrafts; and a network reaching 905 destinations connecting 169 countries and regions, and cities worldwide. It has operations the People’s Republic of China, Hong Kong, Macau, Taiwan, and internationally. The company was founded in 1995 and is headquartered in Guangzhou, the People’s Republic of China. China Southern Airlines Company Limited operates as a subsidiary of China Southern Air Holding Company.
Click the China Southern Airlines stock chart below for a larger view.
China Southern Airlines Sale Promo
Flying high with China Southern. Long term I’m bullish on this company. Short term I’m short selling it, and hopefully buy in at lower prices.
The Market This Week
Corporate earnings reports will be in the spotlight this week, and the European banks stress test is over. I see the market inching higher this week, but now grinding into a concrete wall of resistance at 1113 to 1154 on the S&P500. If there is a continued uptrend past 1154, possibly the uptrend can continue, but I will be watching closely for low-risk high-reward short sell trade setups at these levels, and am already this week with a short sell on China Southern Airlines Ticker ZNH
The European bank stress tests are done now, and trader’s investors will be looking at the new earnings reports coming out this week, and the weekly economic data reports that could put pressure on those positive earnings reports. On average this quarter S&P 500 profits are up about 40% from their estimates. I caution not to put a lot of weight on the increase from estimates as earnings estimates are very subjective analyst to analyst as they are adjusted up and down in different market conditions that put more skew into a company’s forward earnings than good information to make a low-risk high-reward forward bet on in my experience.
This week’s earnings reports of note are Aflac, Boeing, BP, Dupont, Exxon Mobil, and Visa. Even with the positive earnings reports so far, I’m suspicious of a resumption of an uptrend to any great degree with the earnings reports battling with the stream of economic data that could easily disappoint the market in the coming week. During my stock scans this week, I mostly saw low-risk high-reward sell setups than buys. Still, I see the market grinding higher this week, with the end of the week or next week more definitive on if it wants to continue higher or reverse back to the downside.
Gross Domestic Product
GDP forecasts range from the Fed at 3.5% to 2% by Goldman Sachs, and 1% by others. Unemployment is terrible and should continue to stay that way for the time being even though the positive employment spin doctors are doing their best to be upbeat, at least until the congress elections coming up. Maybe the new politicians have got a solution for the USA labor market woes, but I would bet against it right now.
My Stock Pick This Week
Is a sell short on China Southern Airlines. With China is slow down mode for them, but still huge growth for the rest of the world, I see possible continued pressure on the China economy. I think the big pressure on China stocks right now is because they depegged their Yuan from the US Dollar now. The Yuan should rise significantly in the long-term putting pressure on China stock price growth for time being. Of course, select China companies will keep growing strong and outperforming the market so watch them like a hawk for buy in opportunities.
China A Shares – Hong Kong H Shares Premium Differential
One significant thing about the China and Hong Kong markets is that there has been some talk recently about the decreasing premium in the prices of mainland China listed stocks compared to the Hong Kong listed shares of the same companies. The markets have been surprised that after years of China’s “A shares” costing significantly more than the “H shares”, actually more than twice as costly in the beginning of 2008, now suddenly stocks trading in Shanghai are cheaper in some cases and now most of the prices are now virtually even. This is not to say that China A shares are a solid buy just yet, as they could swing to the negative as much as they did to the positive in 2008 compared to the Hong Kong H shares. Pay attention to that correlation, as it speaks volumes about what the social mood is there, and risk appetite in the Asia region.
Sell Short China Southern Airlines – Ticker ZNH
Sell Entry: 24.58 to 22.74
Stop-Loss: 8% from your entry price
Take Profit Areas: 20.05 to 19.71, 19.21 to 18.86, 16.50 to 16.19
China Southern Airlines Company Profile
China Southern Airlines Company Limited operates an airline in China. The company principally engaged in the provision passenger, cargo, and mail airline services. It also provides logistics services; air catering services; pilot training services; property management services; aircraft and engine repair and maintenance services; flight simulation services; and airport ground services, as well as sells duty free goods in the flight. As of December 31, 2009, the company had a fleet of 378 aircrafts; and a network reaching 905 destinations connecting 169 countries and regions, and cities worldwide. It has operations the People’s Republic of China, Hong Kong, Macau, Taiwan, and internationally. The company was founded in 1995 and is headquartered in Guangzhou, the People’s Republic of China. China Southern Airlines Company Limited operates as a subsidiary of China Southern Air Holding Company.
Click the China Southern Airlines stock chart below for a larger view.
Opportunity from Disaster? Hopefully This Won’t Be the Norm
Want to buy the shirt off my back? It’s for sale somewhat cheap right now, and could get cheaper. It’s the summer doldrums in the markets it seems right now with the on average light volume. The wall street pros that still have their jobs might be taking the summer off, and or waiting for what the market is going to do now to initiate any new positions in the markets. This week Halliburton and Baker Hughes popped up on my technical radar screens as some nice low-risk high-reward short to intermediate term short sell swing trades. Long term they are good companies well positioned in the oil field services market and would be nice to buy into at lower prices.
USA Market Indices Outlook for This Week
First I want to share with you where I think the US Stock market indices are heading this week. I currently see major resistance on the Dow Jones Industrials at 10,112.37 to 10,406.96, the S&P500 at 1,071.29 to 1,105.50, and the Nasdaq at 2,201.55 to 2,281.26. I see current index prices hitting strong resistance now or possibly moving up to these upper price levels, whether it’s real buying and or short-covering.
Up Volume Light Down Volume Strong
Lately, on balance the volume in the markets has been pretty light on the up moves, then hit by stronger volume on the down moves. These major resistance price levels above now would be a good spot to sell short for a continuation what looks to me as a downtrend for another round low-risk high-reward selling and lower stock prices. The markets are trading on fear now about the future, and some of the low valuations don’t seem to matter for now. It’s more about the idea of things getting much worse that’s price into the markets right now it seems.
Sell Equities Short, Buy A Little Gold, Trade Currencies
I would like to be upbeat on the equity markets, but I don’t see it yet. Not even for high paying dividend stocks yet. The best investments and or trades I see currently is to selectively sell short equities, buy a little gold, silver for the long-term, and or trade currencies commodity futures short term, and what I highly suggest, to build a business of any kind of any size to contribute to your countries much needed gross domestic product. The GDP idea goes for everyone around the world now. Help create GDP and we help keeping the global economy from heading in to deeper recession and or depression.
My Stock Pick This Week Is Short Sell On Halliburton
Halliburton is a great company but not without its past controversies of its own and now involved with BP, and Anadarko on the Gulf oil spill as Halliburton was the company doing the deepwater oil well work when the blowout happened. Regardless of what and who is to blame, this has helped caused Halliburton and BP to sell off big. I see the selloff at least for Halliburton and I’ll throw in Baker Hughes too continuing for a little longer. If I’m wrong, implement the stop loss target and move on to another long or short stock idea. I see oil and energy prices heading a little lower short-term with the big question mark of global gross domestic product in the spotlight now with slowing economies around the world. If this idea works, we can easily see lower prices on Halliburton even if they are saying the leak has been fixed. There is the collateral damage that will then be addressed, and who pays what and how much for the disaster.
Sell Short Halliburton – Ticker HAL
Sell Entry: 28.00 to 31.56
Stop-Loss: 32.00 or 8% plus from your entry price.
Take Profit Areas: 20.21 to 18.91, 14.57 to 13.64, 7.59 to 7.09
Halliburton Company Profile
Halliburton Company provides various products and services to the energy industry for the exploration, development, and production of oil and natural gas worldwide. It operates in two segments, Completion and Production, and Drilling and Evaluation. The Completion and Production segment provides production enhancement services, completion tools and services, and cementing services. Its production enhancement services include stimulation, pipeline process, sand control, and well intervention services; completion tools and services comprise subsurface safety valves and flow control equipment, surface safety systems, packers and specialty completion equipment, intelligent completion systems, expandable liner hanger systems, sand control systems, well servicing tools, and reservoir performance services; and cementing services consist of bonding the well and well casing, while isolating fluid zones and maximizing wellbore stability, and casing equipment. The Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation, and well construction solutions that enable customers to model, measure, and optimize their well placement and reservoir evaluation activities. Its services include fluid services, drilling services, drill bits, wireline and perforating services, testing and subsea services, software and asset solutions, and consulting and data management services. The company serves national, integrated, and independent oil and gas companies. Halliburton Company was founded in 1919 and is headquartered in Houston, Texas.
Click the Halliburton stock chart for a larger view.
Happy Independence Day USA!
As an American are you wishing you were celebrating financial independence from the economic mess the USA is in currently? The first step to meaningful successful change is to not live in denial, accept the mistakes, and make the necessary corrections and adjustments to prosper sooner than later. It’s time for austerity for everyone around the world now, whether you are a person from main street to wall street to corporate America, and especially the US and Europe Federal governments. But because of old ideas like the “too big to fail” mentality and other old school old age habits, more financial pain and suffering may be on the way before the light of financial freedom shines bright again for the majority of the world again.
S&P500 Still Under Pressure?
I see the S&P500 heading down to the 960.38 to 943.52 area for major support to be formed possibly providing a good possible low-risk high-reward tradable upswing. It’s at 1022.58 as Friday July 2nd. With equities in their current downtrend, dollar strength would be normal in this environment. But then again, the financial markets are not normal anymore it seems, it’s the “new normal” as Mohamed El-Erian of Pimco has stated. I agree with him. It’s the new age, new generations, new changes and the new ideas that need to take root to reverse the downturn, and that will simply take some years to do. So the bottom line is for now, be ready for anything, sell-short, or get out of the market completely, and trade risk cash in the currency futures and forex markets if you want to get a return better than stuffing it in your safe at .home
Buy Gold Now?
With the big selloff in gold last week, the gold investors might be seeing now that inflation is no were to be seen just yet, and maybe they need to remove some long precious metals positions from their portfolio for awhile until the economy shows some real inflation that it’s time to buy the yellow metal again. Or maybe gold will get the bid again when it looks like the financial world is actually going to default and collapse and gold will be the reserve currency of the world. I suggest, if it comes to that, then food and water should be worth more than gold. In the meantime, gold looks down short term to me. I see major support for gold in the 1195.78 to 1153.80 area, and possibly as low as 1110.00. At these support areas, I currently see a good low-risk high-reward buy point to move to possibly gold to move to new highs from there.
How To Make Money In Declining Stock Markets?
Raise cash, go to cash, hold cash, invest and trade cash in the forex or currency futures market, and or sell-short equities on upticks. With the global economy sitting on the edge of full blown deflation now in my opinion, I suggest not buying stocks yet, and possibly even ones that pay big dividends and selling them or short-selling them for the time being. Cash looks to be one of the best investments and trades right now in my opinion, so I suggest raising as much cash as possible, investing and trading currencies short, intermediate, and long-term for the best lowest-risk highest-reward returns, and the most important factor, for the liquidity that any market can provide right now. With the leverage in the forex and currency futures markets, I suggest keep your lot size light, and use stop-loss as you’re most important tools to profit long-term. It’s managing your losses in the markets that will make you profitable long-term. This is the most important in economic times like now.
My Stock Pick This Week Is a Short-Sell on Noble Corp Offshore Oil Driller
With the gulf oil spill, and now BP looking for some global white knight investors to help bail them out of their oil, it looks like there might be more downside pressure on oil prices, the industry and the drillers at least short term I think, and possibly longer than expected. I know oil is in demand long term, but the world is slowing down here, and I think should continue to slow down for better economic health longer-term. I think the downtrend that going on in the industry currently would end up being a very good thing long-term. The downtrend will end someday, but I don’t think it’s over just yet with forward global growth rates forecasted to be very low for awhile.
A possible positive for Noble Corp, is that it has agreed to buy privately held Frontier drilling for about $2 billion, adding seven new drilling vessels to its fleet. I suggest this purchase sounds very good in the long-term for them but it may not have any effect in the short-term with current things as they are right now. The acquisition is expected to be supportive to Nobel’s cash flow immediately and possibly add approximately $2 billion to Noble’s existing backlog of $7.5 billion in drilling contracts, but I’m betting it doesn’t happen that fast and or the market ignores it and their stock price keeps sliding short term. In case I’m wrong, stick to stop-loss and your investment portfolio will still be ok. In case it does, you can play it both ways, short now, and possibly buy it long later at lower prices.
Sell Short Nobel Corp – Ticker NE
Sell Entry: 34.82 to 32.12
Stop-Loss: 36.00 or 8% from your entry price.
Take Profit Areas: 22.55 to 21.09, 15.99 to 14.95
Noble Corp Company Profile
Noble Corporation provides offshore contract drilling services for the oil and gas industry worldwide. As of December 31, 2009, it operated a fleet of 62 mobile offshore drilling units, including 13 semisubmersibles, 4 dynamically positioned drillships, 43 jackups, and 2 submersibles. The company also offers labor contract drilling services, and engineering and consulting services. Noble Corporation was founded in 1921 and is based in Baar, Switzerland.
Click the Noble Corp stock chart for a larger view.
I’ve seen the recent comments on some of my blog posts and it made me wonder if people realize what type of blog I run. 90% of the stocks I write about on this blog are about sub-penny stocks. Unlike stocks on the S&P500, no one wants to own a sub-penny stock, otherwise it would be trading for more than a penny. I tell my subscribers that a sub-penny stock is trading there for a reason. There is something wrong with the stock that makes it unattractive… at least to some people. To others these stocks are a goldmine waiting to happen.
Should you buy a sub-penny stock? What draws speculators to them? Quite simply the potential for returns in excess of 1,000%. Just look at two of my recent stock picks VCTY and SSWC. They have gone on to return in excess of 2,000%. Where else can you find those type of returns in such a short span of time?
The flaw with these stocks is that they almost always come down off their highs. While a stock trading on the Nasdaq has mutual funds and hedge funds buying shares, most sub-penny stocks are purchased only by retail investors. Goldman Sachs has yet to put a penny stock on its conviction buy list. Citigroup is not using its taxpayer, bailout funds to put a floor under the penny stock market. Essentially penny stock traders are on their own. There is nothing there to artificially prop the market. People are either buying the stock or they aren’t.
What does this mean? It means sub-penny stocks are highly volatile trading vehicles, not investments. They can fall a lot quicker than they go up and they can take your money quicker than it took to open that new brokerage account.
How do you make money trading sub-pennystocks? Quite simply you need to be buying before the stock goes up, which isn’t as easy as it sounds. Since stocks can perform reverse splits there essentially is no bottom. How do you find that bottom? How do you find that stock ready for a 1,000% gain? If I told you that I’d be out of a job.
What I will say is this. These sub-penny stocks almost always go down. The trick is buying them before they go up and selling before they start going down again. The anonymous posters on my blog claim I am a pump and dumper, when in fact, if they knew what I was talking about, would realize that I am just good at finding these stocks that are ready to mount a counter-trend rally. I will have more on this in the days and weeks ahead.
China and the Yuan
China said Saturday it’s going to unpeg the the Yuan to the US Dollar now. So, what’s the future for energy prices for the rest of the world now? Below I’ve got Devon Energy as a stock pick this week. A strategy to buy and or sell it depending on which way you think the energy market and associated stocks are going.
The Yuan and Oil
Oil has just popped to $78 plus a barrel in Europe trade this Monday after China’s statement saying that it’s lifting its currency peg to the US Dollar Saturday, or so some say why oil moved up. So this might be suggesting that investor confidence is still strong and a global economic recovery is intact.
Dr. Doom
Nouriel Roubini said last Saturday, China’s decision to remove its currency peg to the USD might mean that the Yuan weakens against the dollar instead of strengthening as the USA Feds want. Yea, don’t jump to conclusions too fast is what I would suggest.
Two-Faced Oil
On one side of the oil trade is energy traders are looking for a stronger Yuan to make commodities such as oil cheaper spurring more demand, and a positive for energy demand around the world. On the other side of the oil price issue is that the recent increase in oil prices does not have long-term fundamental legs to it.
Give Me Some Reality Not Hopeful Promises
The fact is right now, the ability of the Yuan to fluctuate to the US Dollar now cannot be seen just yet as to how it affects the supply and demand for oil. Oil supply and demand in the long-term would be more due to increased or reduced refining capacity, demand for it, and I suggest oil could move higher or lower with or without the Yuan being un-pegged to the USD now.
Oil Short Term
Short term, crude oil closed higher on Friday and the high-range close sets the stage for a steady opening this Monday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If it extends the rally off May’s low, the 50% retracement level of last month’s decline crossing is the next upside target. Closes below the 20-day moving average crossing would confirm that a short-term top has been posted.
BP & Natural Gas Alternatives
The BP oil spill is seeing recent strength in the natural gas producers. The real question is how long is this going to last? Maybe BP can cap that bad leak. What then? Is the recent move up in oil sustainable to take oil back to the 80’s & 90’s or higher? I think not with all the other economic things going on around the world, but I could easily be wrong, so the strategy to buy and sell it if you’re so inclined.
Simple Economics 101
I suggest keeping things as simple as possible. If global un-employment stays high as it is now, and forecasted to be for the next few years, then lower oil and energy prices could be a natural result of that with lower gross domestic product. Of course the spin from the bulls is that jobs are increasing, but are they really? Last month’s non-farm payroll report was a testament to that they are not right now.
China To Bailout the Rest of the World?
Now you could say that China, Asia, and the emerging parts of the world will grow at a healthy pace, helping lift the entire global economy, and that could happen, but I’m not betting on it just yet either. With it actually happening and for many months in a row, I would be more of a believer in that idea, but not yet.
Is Oil Really Running Out?
Today, many oil investor’s traders will tell you that oil running out, and that oil prices have to go higher with less supply. They were saying that 100 years ago also. If I were in the oil business, it would be easy for me to say the same thing to keep the price up.
Short Term News Flashes and Long Term Trends
I say, no one person, institution, or central bank for that matter can support or resist prices for an extended period of time. So news flashes may affect the markets in the short term, they do not make a trend for the long term. It’s going to take more than just a news flash of any kind to create the primary trend.
Lets Make Some Money!
So how do you make money this week with energy? One way I suggest is with Devon Energy. Devon is has good fundamentals and technical’s right now. Maybe you want to buy long? On the other hand maybe you think this oil upside pop is a fake out, and willing to take the risk of selling short. Or hedge the whole thing, buy buying and selling it. I suggest you review these strategies and figure out your risk reward ratio to see where you want to fit in. The sell has a better risk reward ratio, but the trend is your friend, and near term Devon could continue up so trade accordingly.
Buy Long and or Sell Short Devon Energy – Ticker DVN
Buy Entry: 68.29 to 70.19
Stop-Loss: 62.65
Take Profit Areas: 71.49 to 72.63, 77.18 to 78.49
Sell Entry: 71.49 to 68.69
Stop-Loss: 72.63
Take Profit Areas: 59.56 to 58.65, 57.35 to 56.31, 51.50 to 50.59,
Devon Energy Company Profile
Devon Energy Corporation, together with its subsidiaries, engages in the exploration, development, and production of natural gas and oil; transportation of oil, gas, and natural gas liquids (NGLs); and processing of natural gas. The company owns oil and gas properties principally in the Mid-Continent area of the central and southern United States; the Permian Basin within Texas and New Mexico; the Rocky Mountains area of the United States; the offshore areas of the Gulf of Mexico; and the onshore areas of the Gulf Coast, principally in south Texas and south Louisiana. It also owns oil and gas properties in the provinces of Alberta, British Columbia, and Saskatchewan, Canada. In addition, the company owns properties located in Azerbaijan, Brazil, and China. Further, Devon Energy’s marketing and midstream operations include the marketing of crude oil, gas, and NGLs, as well as the construction and operation of pipelines, storage and treating facilities, and gas processing plants in North America. As of December 31, 2009, the company had proved developed reserves of approximately 1,922 million barrel of oil equivalent. Devon Energy sells its gas production to various customers, including pipelines, utilities, gas marketing firms, industrial users, and local distribution companies; crude oil production to refiners and remarketers; and NGL production primarily to customers in the petrochemical, refining, and heavy oil blending activities. The company was founded in 1971 and is based in Oklahoma City, Oklahoma.
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