Today's action is primarily fueled by the positive pressure on crude price. With crude closing above $16, we have a chance that crude may stick above $16 and trade between $16-$17.5 for a while. As long as crude hangs above $16, I expect the drillers and oil services to continue their upward bias. Since we are heading right into overbought territory with today's action, the treshold for profit taking trigger will be very thin. If the profit taking comes, I would again use the 1 step upward, 1/2 step downward rule to establish when the profit taking may have run its course in the next down phase. Ron, I think it's about time to readjust the settings for those nifty stochastics. We may already have one cycle down.
Near term crude has good backing so this down phase may not come next Monday. But if crude lose strength for whatever reason, a 10% correction would just be normal. Longer term, I encourage everyone to pull up a 6 -12 month chart and see where their favorite driller is heading. In general, the driller is on the right side of the U with some probably at the midpoint already. We are no longer in the trading range. We exited that range early April when RIG and SLB began to pierce through their trading resistence.
Richard, one consideration. Instead of shorting a driller at this point, I think it is more prudent to sell calls. In an up market like we have now, call premium is going to be pretty good. Need Steve to confirm this because he is the resident option guy. My rule of thumb is in each up cycle if I can get 10% premium with less than a month to go I'll sell call. Since each short term cycle lasts only 2-3 weeks, it is sometimes less risky to make it a point to buy the call back when they reach penny status rather than risk being called out when the option expiration runs into the up phase of the cycle. I believe Big Dog is getting very good in making the second living out of doing this. I only tried this option thing recently and find it to be a more conservative way to increase wealth, especially now since we have broken away from the trading range and is heading up longer term.
A favor from someone here - can anyone summarize the earning this quarter and identify which company reported higher/expected/lower earning vs estimates? Ron, do you have info like this on your site? |
