The ''Bottom'' ... "Gotta know when to hold, when to fold, when to call; or when to walk away and when to run...''
Personally - I'm CALLING; right here - right now !
I read earlier today for someone calling for a re-test of the bottom. We have basically all ready had that... We have had the proverbial re-test on low volume. We've had a few spurts upward - where Institutional buyers played follow the leader and poured into the oil patch. We've also had 2-3-4-5% 1 day sell offs that have brought us back down, but we are not setting new lows on these selloffs any longer. Look how many individual stocks are holding well above their recent bottoms. The weakest, most crude sensitive area of the land drillers is one of my primary, personal indicators. When I see UTI holding 25% off its 52 week low, BDI rebounding off of that nasty 1 day capitulation (that I bought into - in the face of criticism) and NBR is well above its low etc... if the land drillers are holding - take note ! MRL/(MDCO) also has held well above the $12 level after bouncing off $8 3/4 and on & on... Sure, we have some individual stocks like FGII today, where an Institution or two - are selling off and will run the stock down untill they are bled out... These are buying opps as well - imho.
What we are experiencing here, is a definite basing mode. We have numerous fundamental and technical signs. Technically speaking, many analysts and traders (who were not specifically oil sector Bulls) mentioned that they were waiting for a re-test of the bottom on low volume - which we had; and the institutions kept their word and bought in big with some 2-3-4-Million Share days in individual OSX stocks and accompanying +$2-3 pops in individual OSX stocks. Anyone who expected a pure turn on the dime rebound here is niave. What we should expect and what we are seeing; is the market trying to make up its mind... We have had some major Institutional buying here that we did not have in the June Swoon or in the July continual sell offs. We have a fundamentally recognized value here by Oil & non-Oil specialists alike. What we are in the process of benefiting from, is the formulation of negative/bearish investor sentiment in the overall Market. The recent 100-200 point selloffs in the face of Acampora's seemingly forgotten & prophetic and very brave call; along with International Financial turmoil has added a sobering pall to the overall market and its present valuations. Sector rotation is starting; as investors and Institutions alike begin to take some profits off the table here and rotate into small caps and specific undervalued sectors. We will not form a strong leg up without sector rotation. When we begin to see positive numbers on the OPEC cuts and supply statistics and the accompanying move up in Crude prices we will start to move steadilly upward. Of course, in this primary stage of ''basing'' we will still selloff in conjunction with the overall market on major down days. But soon this will end and we will begin to trade on this sectors own fundamentals. We have all ready seen some positive numbers on crude. We have another OPEC/Ridayh meeting imminient, we have International situations which have high upside potential to move crude upward, we are getting closer to winter with each passing month and it's accompanying strong demand in crude products. While we will most probably not see $18 anytime soon; we will also not likely see $9-10 Oil as well. Current predictions and the ultimate realization of $15-16 Oil will give us a basic return to ''business as usual''....
The incredible returns with merely the return to April/May price levels in the Oil Patch stocks, far exceed the potential downside using any reasonable risk vs. reward model. Once again; it is not necessary to call the exact bottom, but to merely start buying here at these strong fundamental valuations that are now technically supported. Keep 30-40% cash to average down on a 20% dip if we see lower lows from here... But does anyone really see any mathematical or financially fundamental possibility of the sector going beyond where an ''averaging down'' move on say a 20% selloff from present levels, would put you within 10% of a worst case scenario actual bottom ? When we have a very conservative 40-60%+ upside, allmost accross the board here just n the return to the April/May valuations and not even near the prior highs of last fall - I just feel the risk vs. reward balance has tilted to a level that we will have a ''pigs get fat, but hogs get slaughtered'' scenario playing out... where those that get in will be richly rewarded, but those who greedilly or fearfully wait for further lows will end up like the proverbial '' slaughtered hog'' - either missing the train all together or perpetually geting on & off - impossibly trying to time each head fake rally, short retraction and long leg upward...jumping in & out like our poster child - my 'LIL Buddy; Diamond H...that Literary Giant and proverbial ''finger in the wind'' poster child of Market Timing & MO-MO mantraism...
In closing - historically & fundamentally in a weak sector that is experiencing an all most historic sell off - complete decimation; the market has priced the worst case scenario possibilities going out 6 months into these stocks today. What possible remaining bad news can be priced into these stocks ? If this is not a ''classic'' contrarion, out of favor, over-sold, pure bottom fishing - value play; please show me one ! This WILL rival the Bank/S&L stocks of recent lore, as one of the great % returns of the decade in a traditional sector (non-internet etc.)... |
