Crude Oil — Page 2

Dollar falls, Crude up

December 12, 2008 by Chris 3 Comments

The US Dollar violated the 50-day moving average for the first time in five months while the Euro Dollar crossed back above its 50-day moving average during the same period of time. Crude oil was up 10% as it closed above $48 a barrel and the ETN I highlighted from last week is now up 30% from its low. I do own 1/3 of my position in DXO but I can’t say I caught it below $3. I highlighted the three investments last week in a post titled:

12/02/08: Dollars, T-Bonds and Crude Oil

I started to mention Oil as a possible value buy in November:
11/26/08: Oil a Value Buy?

Here’s what I was thinking:

I mentioned my idea last week: Crude Oil ETN’s. My wife and I have agreed to start purchasing a stake in crude oil investments, starting this week with a 25% purchase of our fully anticipated position (DXO is the instrument). The crude oil charts have not turned positive and I have not received any buy signals such as the ones I highlighted in the dollar earlier this year but I am viewing this more from a value perspective rather than technical. Maybe I will strikeout big time but I am swinging for it anyway.

Too many Middle East talking-heads want to cut production and raise the price of oil. Maybe I am extremely early to this “rebound/ bottom-picking game” but I can’t seem to reason how oil will stay low for long (talking years here, not a short term position).

It will be fun to see how this plays out.

Filed Under: Commodities, Crude Oil, Currency

Dollars, T-Bonds and Crude Oil

December 2, 2008 by Chris 9 Comments

With such negativity in the market, I decided that I would search for any glimmer of hope, a small nugget of positivity. Well, it leads us to the US Dollar, Treasury Bond Funds and the Dow Jones US Water Index. Other than that, most, if not all charts are well below their major moving averages and are still heading south.

I am not interested in buying the T-bonds or the water index but the US dollar has been front and center in my portfolio for a while now. I started to jump on the dollar bandwagon (8/24/08: US Dollar Buy Signal and 12/17/07: US Dollar Snapshot) prior to its bottom in early 2008 and I am now interested in jumping on another train.

I mentioned my idea last week: Crude Oil ETN’s. My wife and I have agreed to start purchasing a stake in crude oil investments, starting this week with a 25% purchase of our fully anticipated position (DXO is the instrument). The crude oil charts have not turned positive and I have not received any buy signals such as the ones I highlighted in the dollar earlier this year but I am viewing this more from a value perspective rather than technical. Maybe I will strikeout big time but I am swinging for it anyway.

Too many Middle East talking-heads want to cut production and raise the price of oil. Maybe I am extremely early to this “rebound/ bottom-picking game” but I can’t seem to reason how oil will stay low for long (talking years here, not a short term position).

Saudi Arabia’s king says the price of oil should be $75 a barrel, much higher than it is now, but his oil minister indicated Saturday that no measures will likely be taken until OPEC meets again next month.

“We believe the fair price for oil is $75 a barrel,” he said, without saying how the price could be raised.

Iraqi Oil Minister Hussein al-Shahristani said on Friday that 80 dollars a barrel is a “reasonable” price for oil and that his country would support any OPEC decision to cut output.

“A reasonable price for oil is 80 dollars a barrel,” said Shahristani on arrival in Cairo to attend a consultative meeting by the OPEC cartel to study slumping crude prices.

“We have to make sure that produced oil is used for consumption and not for storing.”

Filed Under: Crude Oil, Currency

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.