< best performance by major oil sector during a two month period in thirty years>
Food for thought:
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***why sell/take some profits here ? - something about that buy low - sell high thing (VBG). If taking profits on the tail of the best 2 month run in 30 years isn't prudent - what is ? Paper profits are just that - ''paper'' -untill you actually cash in some chips.
<<Deutsche Bank's Young argues, however, that current market valuations for the oil majors are ''off the chart'' and reflect unrealistic investor expectations about the likely strength of a recovery in the industry's earnings.
''I think there will be a substantial earnings shortfall versus expectations throughout the remainder of this year and into the year 2000,'' he said. Young said he had a simple message for investors about oil stocks: ''Sell!'' >>
....remember, he is talking Intnl Oil Majors here (not OSX) but the theme is releveant and getting more so daily... Sooner or later; the Street will re-focus on the most fundamental of all fundamentals - EARNINGS !
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***why rotate those OSX selling profits into the Independant E&P's ? - something about buying off of those massive writedowns in late Jan, & of late - only to know that they would get to re-book the gains with crude's rise later this year...buy low - sell high.
The independant E&P sector has the best risk/reward profile presently, is not as over-bought as the Oil Majors arguably are; and have much stronger fundamentals and earnings strength nearterm than the OSX stocks. - we really have a subsector standing out from its bretheren here (OilMajors/service/drillers) on a risk/reward basis and on a fundamental basis. Rotation to the E&P's here, off of profit taking in the OSX sector is a great hedge on not missing any continued run up. To sell and to go to just cash - can open one up to missing the entire move, but rotating to laggards, or E&P's; keeps you just not only in the game, but may well turn out to be able to exceed the gains of the OSX going forward.
I do however think that the penduleum will swing back to the OSX stocks when we see finally see rig counts/utilization, dayrates, new projects and earnings upside being announced. At that time , when the actual fundamentals are the story - then an over-weighting back to the OSX stocks will be the play imho. Right now - the profit taking opportunites off of the ''expectations'' move of late is too good to pass up.
<<RESEARCH ALERT-J.P. Morgan ups Nuevo Energy>>
<<NEW YORK, April 19 (Reuters) - J.P. Morgan said Monday it raised its rating on Nuevo Energy Co. to buy from market performer based on the ''dramatic'' improvement in crude oil prices, the company's financial strength and improving profit margins.
-- Raises price target to $20 from $15 a share.>>
-- Says the company will likely re-book substantial oil reserves at year-end.>>
***...this last sentence is the key here - the ultimate ''re-booking'' of Oil Reserves is setting up many of these companies for huge upside appreciation.
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*** Do you want to be buying, or to be selling; at the peak of the best 2 month run in 30 years ? - I'll play the historic odds - tempered with risk vs. reward; good luck mo-mo players - I've got some more to sell - if you want to keep buying on this ride up here ...(VBG) - by the way; experience is a great teacher; I kind of remember how those stocks looked real good about the same time last year in the March to May run, then came ''June'' ... just too much emotion, too much money and too much history; for there not to be an inevitable retracement shortly.
<<Oil prices ahead, making oil share gains best in 30 yrs>>
by Paul Thomasch
<<NEW YORK, April 19 (Reuters) - Oil prices continued to plow ahead on Monday, clearing the path for major oil stocks to continue their best run in at least thirty years.
Crude oil futures for delivery in May finished the session at $17.80 a barrel, up 47 cents, as traders continued to gain confidence that leading oil exporters would stick by an agreement to sharply cut production and eat into a world oil glut.
Since the middle of February, when it became clear that the Organization of Petroleum Exporting Countries (OPEC) and other key producers were prepared to sharply cut back crude supplies, oil prices have climbed by about $6.50 a barrel, or over 55 percent. They are now trading at 15-month highs.
Major oil company stocks have followed suit, with the Standard & Poor's Oil International index up over 30 percent since early March, while the S&P 500 is up just five percent in the same period.
Schroders' Meyer says this is best relative and absolute performance by the major oil sector during a two month period in the thirty years since Schroder began keeping records.>>
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***One thing that must be kept in perspective:
...one of the main reasons I am selling here is that I have played the rolling tading range of OSX 45-72 during the 4-5 cycles since August. This is not the first time I've bought @ OSX 45-50ish, nor the first time I've sold at OSX 68-72 - now 77. As such, it makes no sense for me not to sell with a 50% sector move of late, as by selling I've had the opportunity to take large positions in individual trading opportunities like HMAR, SEV, CLB, MEXP, BEXP and a few others. Without taking profits, I could not have taken some moderate to large positions in these individual trading opportunites. Many times I have went to margin buying into these bottoms - especially the January & March blow offs of late - so I need to sell and take profits out of prudent money management alone many times. The time to NOTget caught on margin is on a violent retracement ...
I am sure that anyone who buys & hold will do very well here. This is however one of the best trading enviroments that one could ever ask for; as we have seen a strong pattern of cyclical ranges within the moves here and many individual trading stories as well. One has to stick with what works and with what one is comfortable with emotionally & financially.
I will concede that if this was my first ride from OSX 45-50 to post OSX 68-72+ - then indeed I would probably not be selling/taking profits as much, if at all. But, this is the 5th time we've been able to play strictly the trading cycle of OSX 45 to 72+/- here, not to mention all of the individual trading opportunities. It makes no sense to change what has been working. I'm much further ahead of where I would have been if I had just held - no contest and the tax implications are not even a factor, given this volatility and the number of trading opportunites. As Oil has increased dramatically since the prior cycles, it makes sense to raise the next ''range'' of the trading cycle up to perhaps OSX 62-7 to OSX 78-88ish and perhaps soon we will trade in the range of OSX 80-85 to 100ish; but the main point is that this sector has so many volatile catalysts such as API/EIA numbers, OPEC compliance & news, Foreign news events, Crude prices, earnings, rig utilization/counts, dayrates, mergers, earnings - lack of earnings etc. that the we should continue to have volatile ranges in which to trade.
In volatile enviroments the opportunites are more dramatic for active trading & rotation. In a more traditional historic market of 10-12% annual appreciation - then the traditional buy & hold philosophy makes perfect sense as the risk/reward profile of beating the markets gains are much less attractive. But in this volatile enviroment of numerous 50% sector moves; if you can pick stocks accurately, if you have some success of reading & timing the market; then the rewards can be substantially superior to just buying and holding.
good luck all - many roads to the top; hope to see everyone there.
PS - re: ''Buy Low - Sell High'' --- why is the ''hold'' word not highlighted in this favorite one liner ? |
