Hi Scott: You might check out the "Strictly: Drilling and oil-field services" thread. Lots of info there. I'm becoming a bit less positive longer term on this group simply because every analyst on wall street has several stocks in this sector as their favorite, every guest host on CNBC likes the sector, every broker is recommending oil stocks to their clients, and people I talk to that normally confine their investments strictly to technology stocks are thinking about buying "oils" of all things! That's not to say that I don't think this group will still be one of the leaders after the market has consolidated for a while (the herd will provide strong breakout power), I just think this points to a "don't buy and ignore" strategy. Rather that a long-term (>1yr) hold, I'm now considering these as what I call "OPIE" stocks (for Other People's Irrational Exuberance, a.k.a "hype" stocks. Yes, they have the fundamentals to back some nice moves, unlike the typical hype stock, but with this kind of herd following, I had to change my outlook. Don't get me wrong, there's nothing wrong with hype--hype can make you a lot of money in a short time--as long as you recognize it as "other people's hype." You're just along for the ride--sort of a "hype parasite." What this means now is that I will trade these exclusively on technicals, and carefully monitor the inter-group correlation and synchronization for signs of a divergence (especially when they approach their old highs). In an up market, these trade in virtual lock-step within their subgroups (e.g. land drillers, shallow-water offshore, deep-water offshore, tubing, etc). When the sectors start to weaken and flaten out, and the correlation drops off, I'm out. In retrospect, this was the clear pattern for this current decline if you study the charts. The first and only time we had lower highs after an intermediate-term dip (i.e. failed retest), the downtrend began. Many textbook perfect tops. Past results are no guarantee blah blah blah, but that's the approach I'll be taking unless something happens to change my view. Can't predict the future, can only study the past and learn from it. Oh if I only had a dollar for every oil stock that showed up in my shorts screen that I rationalized away as "these are fundamentally too strong--they deserve these gains they've had this year...if they do go down, they won't go down much...I'll skip these. Live and learn!
dh |
