Showing posts with label Crude Oil. Show all posts
Showing posts with label Crude Oil. Show all posts

Oil and Energy Continue to Perform

Crude oil continues to breakout and show high relative strength. It is a momentum breakout even as the overall stock market falls and continues to put up big red days. I see it as a high inflation play but regardless it is unstoppable at the moment. I'm fairly overweight energy in my long-term account and have been trading USO calls. I like PBR Petrobras here with it's high increasing dividend payouts. It has increased the dividend greatly the last three quarters and it looks like big payouts are in the future. The floor for dividend payouts is $4 bil according to the company for this year and they see this increased payout contnuing for a few years. They have reduced long-term debt considerably. They are looking for 60%-80% of free cash flow to be payed out in divdends. I noticed the stock chart while screening breakouts and then I saw the high dividend. The yield with the stock at $14 a share is roughly a 14% div yield here if things go as planned. The worst case dividend yield scenario is a 4.4% yield. I'm bullish on oil and see this as a good pick up here. It is coming off a bull-flag today.

Video Blog #2

This is my second video blog ever. The first one I posted on my other blog . I was looking for a good desktop recording software and ran across this one called HyperCam. I'm still working out some bugs with the audio to video sync. I forgot to mention the rounding top that Under Armor has. In the video I discuss my UA short and look at crude oil and natural gas. Which way will crude go from here? Watch and find out.

Proof The Dollar is Still Correlated With Asset Prices

Pundits will continue to go on CNBC and business new channels talking about how oil and asset prices are a function of supply and demand and even politics. We can continue to laugh at them with confidence. If you've read my blog for awhile you might remember Quantitative Easing and the Stock Market. You might even remember Why U.S. Stocks Will Rise in 2011. Those old posts just show that the FED has controlled asset prices. To some people that's old news but to others I suppose they will never understand it. Probably the hardcore Keynesians.

Today was another FED meeting. I don't care as much about the language of the meeting as I do the market's reaction. Boy did the market react. During the meeting the dollar index practically crashed and oil rocketed up. You can see the price of oil skyrocket around 1pm below in the ETF USO. In the next chart below you will see the dollar fall dramatically at 1pm also.
Furthermore, precious metals like gold and silver spiked today as well. Here is a chart showing gold.

I believe that without the news today crude oil was on pace to continue crashing. It had already reached the lows of 2009 and the technicals were pointing toward a strong breakdown of the chart. Based on the reaction in the currency markets I see the dollar weakening for awhile now. This is a clear "spike top" chart signal on the dollar.

The charts above are from my favorite trading platform Medved Trader. Jerry Medved was the creator of Quote Tracker which is no longer being updated and was scraped by TD Ameritrade. Check out Medved which is in beta and is free for now.

Crude Oil Trade

Crude oil has been forming a trading range lately with support being particularly defined. With a steady decline right onto support I saw an opportunity to get long. Getting long right on support gave me a clear area for a mental stop loss. Not only that but the upside potential conservatively was the top of the trading range at resistance. I drew up the trading range below.

The stock I used was UCO the double long crude oil ETF. The chart of USO and CL are very similar. I bought UCO at 8.07 on the 24th of February and tweeted it on Twitter. The doji candlestick it printed on the 23rd pretty much confirmed my area of support. It just hung out and declined a little around support after I bought it. I was fine with that as all that mattered was the action off support.

The next day oil ramped up big and UCO hit an intraday high of 8.57. Along the way I sold about 3/4ths of the position at $8.28 locking in the gain. Expecting more run days I held the rest overnight. I set a sell stop loss at 8.15 and the next day stopped out of the rest of the shares at $8.15 for a slight gain. Scaling out the way I did in tranches selling 3/4ths of the position with the gain really made this trade work for me. I missed the top but caught a good gain which I'm happy with. This especially since my thesis of a run to resistance is proving wrong so far.

We'll have to see what happens with oil over the next 24-48 hours to get an idea of direction. It very well may continue higher or we could crash below support. If there is a gap down below support oil will definitely be testing the lows of the winter.

Small-Cap Value Oil and Energy Stocks

I like researching and writing these articles. I always try to post here atleast once a month. I could probably post almost every day because I love analyzing and blogging but I doubt my girlfriend would like that. She would probably punch me.

The drop in oil prices has brought a lot of energy companies share prices down significantly. Key Energy Services (KEG) is a $313 million dollar well servicing company out of Houston, Texas. This small-cap has $443.8 million in net tangible asset value(tangible assets - total liabilities). So with a market cap of $313 million and tangible assets of $443 million it is selling for less than all the working capital and equipment it owns. This is even with the stock price up a whopping 17% today. In 2013 it had $64 million in free cash flow. As a small company the stock presents the possibility of significant growth in stock price as it recovers. The downside is earnings haven't been consistent over the years.

Energy XXI (EXXI) owns oil and natural gas wells and has a cool $1.42 billion in net tangible assets and a market cap of just $336 million. This is 76% below net tangible assets and 82% below book value. The company was profitable since 2012 but earnings are trending down.

The final oil stock is Parker Drilling (PKD) a $384 million dollar company with $492 million in net tangible assets. So we are still at a discount to net tangible assets. This one is not as cheap as the ones above, however, it boasts a lot more profitability. Earnings are more consistent. Infact it was profitable in the second and third quarter.

If oil prices are actually bottoming here as they appear to be doing small companies will have some nice appreciation. They come with more long-term risks of course versus their large cap counterparts. The ones above are basically penny stocks which is fine with me as they are traded on good exchanges and present some value and technical opportunity. I hope you enjoyed these oil and energy ideas on this value investing small cap stocks blog.

Bottom Up and Top Down Stocks

I went through some scans I typically go through and thought I'd post some that caught my eye. The first one bottom up is Sucampo Pharmaceuticals SCMP.  The chart was cool because it just broke out of consolidation on very strong volume. It's also at a 5 year high. I looked at it some more and this is just under a $700 million dollar company with a diverse portfolio of pharmaceuticals it sells. The good thing I see here is the earnings revisions. Next quarters earnings estimate is $.11 up from $.05 90 days ago. The current years estimate is $.47 a share up from $.22 ninety days ago. Next years EPS is currently $.60 up from $.40 ninety days ago. It's always great when earnings are revised up. With the stock at $15.66 this gives us a forward P/E multiple of 26. With earnings growing about the same rate the stock is conservatively fairly valued. However, the next 5 years are expected to grow more giving the stock a mere .35 PEG multiple(price to earnings growth). Lots of bullish stuff going on here.

SCMR New high on volume

 I found this coffee company called Coffee Holding Company ticker JVA. It is a small company with a mere $34 million dollar market cap. Coffee companies are usually good businesses especially if you are selling beans wholesale, which they are. They are profitable and I see no reason the stock should trade around net tangible asset value. Roughly $20 million is net tangible asset value and the market cap is just above it at $34. It's around technical support and just had a wide ranging day up 7%.
that is technical and fundamental support

The top down one is oil. I think it is a good time to start scaling into crude oil long. Everybody knows the ETF USO. USO is a terrible way to invest in oil. It's because of the way it rolls the contracts. It has to turnover futures contracts thus resulting in a lot of decay. The futures themselves CL is ideally the best way to trade oil. There are better ETF's like 12 month Oil ETF USL . USL holds longer term contracts and thus more closely resembles the actual price of oil. I'm long some USL now. Full Disclosure: long USL

Net-Net PRLS Update and Metals Setup

I've been writing on Peerless PRLS here on the blog for years and in the last post on it I called it one of the most compelling net current asset stocks out there. They recently made an acquisition and now have a cash buyout offer for $7.00 a share. I talked on the phone with Peerless PRLS Chairman and CEO Timothy Brog five years ago. He's been very committed and patient in adding shareholder value with this company.

Metals are on trend support. I have a buy stop order in too long JNUG at 21.80.  Crude oil has a setup as well. There is a triangular consolidation on this flag/pennant over the last few days. If crude continues to crash I have a buy stop order at 74 in to short oil with the ultrashort ETF SCO.


Oil and Drug Trades

I'm long a couple position trades. After stalking oil for awhile I put a buy stop for UCO the oil ETF in at 29.75 a share a couple days ago. I got filled on UCO and am now long. I'd like to keep this on for weeks. I also bought ZLCS a pharma company. I got filled in the 1.90s a share. Couldn't have asked for a better print on the day. A nice hammer. I expect this to run a lot after it hits over 2.00.

Crude Oil Commentary: Bulls in Charge

To start I will do a recap on some of the stocks I've posted on lately. One that continues to surprise is Plug Power PLUG. I posted it when it was around $1.75 a share. It printed $4.90 today! ETRM followed through too. Interestingly enough Delcath Systems DCTH bottomed out around net current asset value.

Now on to crude oil. There is a long setup now as it is back on trend support. When it comes to crude we have to be bullish right? For starters there is the inflation piece. Over decades the majority of oil's gains are attributed to inflation. Will there be inflation short-term? I definitely believe so. With more dollar debasement on the horizon I think inflation is more likely here than deflation. Let's even say one drinks the FED's Koolaid and would rather go on CPI, M1 or M2. Still looks like inflation to me. Unemployment is down and the economy is a little better. So I think the fundamental bullish case is sound and the long setup is here again in the charts.

We are back on trend support folks. It will be interesting to see how the price acts around trend support here but this is still a long setup whether the signal fails or not.

Now a slightly longer-term chart. You can see the rock solid support. Vehicles to trade oil include the futures outright CL, ETF's USO and USL. USL has longer contracts so there is less decay than USO.

disclosure: no positions in any stocks mentioned

Trading Range Breakout For Crude Oil

This is a followup to the post I did on crude oil in June. The triangular consolidation on crude had been forming for a long time. Crude finally broke out of the ascending triangle. This is a very bullish chart still and I wouldn't be surprised to see a 110 retest. Triangles are very powerful chart signals. I drew up a new chart and I posted it below. The trend line breakdown I circled was very telling of what direction it was heading. That was definitely a failed signal.

I sold my KWT solar etf position for a slight loss at $46. I didn't get an ideal entry and didn't like the price action so a stop loss is a stop loss. I'm thinking of uploading some video posts in the near future here. I'm looking for a good desktop video software so I can show what I'm talking about simultaneously.

Crude Oil Chart and Position Update

I'm long KWT the solar ETF from a $49 entry. I have a mental stop loss of $46 a share. Around $38 a share is more of an ideal stop area because it is below the old resistance from Fall of 2012. I run a lot of Stockfetcher scans throughout the week and there are a lot of long setups that keep popping up as the market is still in bull mode. I only scan for stocks priced from pennies to $10 a share. This pull-back in the major indices looks like just a consolidation right now after that huge run-up.

I try and follow crude oil regularly. I've posted up a chart that shows the resistance level that crude has failed to break through over the past 12 months. Along the way from where the price is from the summer of 2012 there has been some triangular consolidation that you can see in the chart.

The short-term chart technicals clearly say to get short right here. If I actively traded CL futures the stance here is definitely short biased. We will have to see what becomes of the triangular consolidation over the coming weeks. It may be very telling.

Gold Technical Analysis January 2013

Gold is still in a secular uptrend. The yearly charts are a lot more choppy. There was a spike bottom in the chart below that is getting retested. I don't see any good signals here because of how choppy the long-term chart is. Crude oil is equally range-bound and in an uptrend the past couple weeks.

Net Tangible Asset Value Stock Plays,Oil & Retail

I crunched oil and natural gas stock Delta Petroleum's DPTR net tangible asset value to be around $515,000 vs a $368,000 market cap.

I'm pretty bullish on commodities and oil with Bernanke being re-confirmed. He's going to drop dollar bills from helicopters or even outer space if he has to to get the economy going(or just to hold its ground). Commodities have done very well the past 10 years because of inflation whether one wants to believe CPI or not. Gold has outperformed the major US indices since 2000.

Retail stock Borders BGP is just over net tangible asset value but has been beaten down a lot lately. I'd especially like to see some commitment by institutions with upgrades because it very well could continue to drop.

Image and video hosting by TinyPic

Image and video hosting by TinyPic

full disclosure: no position in BGP or DPTR at time of writing

Time To Buy Crude Oil?

I was watching crude oil over the last couple weeks but this last week I got distracted with some other stocks like my QDEL buy and I missed the easy oil trade. I wasn't watching for a breakout. Let's go back a second. Well, a week or two ago I saw the same exact pattern forming in oil. Fundamentally oil and gold rise because of inflation.

Image and video hosting by TinyPic

Image and video hosting by TinyPic

On this chart below I was expecting heavy volume to come on the first move before a breakout. It wasn't there. Usually when a triangle pops it is on volume like gold was. There were two hammers back to back leading right up to the breakout though that I missed. There actually is a triangle that this move has come off of just not the long one I was expecting.
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Time To Buy Oil ETFs?
For the very long-term it's a good idea especially on major dips. But holding oil contracts outright vs ETFs is better. For holding for months at a time the etf USL should track oil better vs USO because of the contracts. USO has underperformed oil because it holds short-term contracts. USL holds 12 month futures contracts.

I doubt there is that much short-term upside left on this move but I wouldn't be surprised to see a couple more days before some consolidation. I'm not sure I will put a position on on another breakout because I play oil with ETFs like the double long DXO and I want to see a lot of clear upside that I can swing trade. Maybe I'll take a stab if bigger volume comes here this week.

full disclosure:no position in DXO or any oil

Oil Technical Analysis

Crude oil has really been trading well on technicals lately. It's actually been trading on technicals to the T. So easy to read the important spots. Here is an older technical trade set-up on oil that turned into a good trade for me.

I was actually going to post this a day ago the night before the beating it took yesterday. Sorry about that. Anyway, I actually missed the trade because I wasn't watching oil.

The first circle on the left is a somewhat weak shooting star candle. Just means sellers were particularly strong by the end of the day. Buyers were not in control. The significance was it was at the peak of price resistance. Next circle. Big doji right at resistance. Very bearish. The doji means there was a battle between buyers and sellers and it reflects major indecision in the marketplace. When a doji occurs at the extreme end of a trend it often indicates a reversal in trend. I noticed going back a lot of months a doji was a good signal of an earlier trend change to. Both of these clues taken together leads the chart to read more downside. It definitely happened after that doji. Yesterday was a huge drop. That day isn't on this chart but USL closed at 35.50. I think oil finished at 62 a barrel.

Also, if you are going to go long on oil for a longer term trade from what I understand USL tracks better than USO because of the way they rollover the contracts.

disclosure: no position USL

What's Really Up With Oil? Simple Economics? Paul Van Eeden

Paul Van Eeden about monetary policy of the FED