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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Think4Yourself who wrote (84646)	1/18/2001 5:28:03 PM
From: SliderOnTheBlack	Respond to of 95453

"JQP"... thanks for your thoughts - another ? ...do you ever "protect profits" - ie: do you have a mental stop loss point that you will sell at "logically, or technically" verus continuing to hold on the "emotional" story; while focusing on the fundamentals ? - in other words; if your emotions gain control & the stocks also disconnect from their fundamentals and just continue to sell off; do you have any process to cut losses & protect previous profits ? Personally; the day I buy a stock - I don't automatically have, or set a pricepoint that I will automatically sell. I view the Oilpatch as a living breathing, constantly evolving cyclical sector; but that word "cyclical" is the key as we have small cycle, legs, waves - whatever you want to call them; within the broader cycle itself. At this point of the cycle with all the broad market & economic risks; I allways use mental , if not physical stop losses. I just do NOT understand how someone who rode XTO for example from $20 to $30 didn't cut losses at $26/$27, or $25 and instead rode a round-trip ticket right back to $20 ? How can you sleep after doing that ? Hell; I'd be throwing large appliances, if not people out windows (VBG)? What do you do if XTO opens down to $17 & drives thru $15 in a few days ? What do you do if you were "max margined" at XTO $25ish... at XTO $15 ? Doesn't that make you physically sick ? - I mean to be right on the story, but got too greedy & stayed to wave the pom poms too long & sat and watched it rollover & round trip on you ? All those profits - poof ~ up in smoke.... sad, very sad. Again; looking back on the Oilpatch over this fall & winter I think we emerged from the "mid-cycle" shakeout between the true believers & non-beleivers this fall. That is why we sold off after reaching OSX 140 in early September; because many Oilpatch investors weren't interested in technically trying to time the exact top - but rather fundamentally; they merely looked at $35 Crude Oil along with the present NG situation & asked themselves - are we more likely to have higher, or lower commodity prices 6-9-12 mos out ? In retrospect; was it really that hard to see that we had a "too perfect storm" then ? Literally; could it get any better than $35 Oil & $7 Gas, than record low supply and storage levels, than a Historic Winter arriving early , with Oil and Gas getting all the headlines - including the proverbial Kiss of Death - the Barrons cover story more than once ? Literally; we joke about those types of sentiment indicators - but, they are true & they work. I think those that sold the OSX off its early Sept highs felt as I did; that the stocks had 90% of everything likely to occur this winter - allready priced in. They were certainly fairly, if not fully, or even over-priced and the risk vs reward ratio & fundamental valuations had peaked. Then the Nat Gas Crisis story unfolded and brought in some mo-mo money into the E&Ps and created this last crescendo up move in the E&P's. It wasn't hard to see that it was mo-mo money & what should have triggered this as a profit taking opp to threadsters here imo; was that the peak winter heating demand story; as well as Winter Weathers impact on NG commodity prices - all had a finite lifecycle... that being "this winter"... it was going to peak in Jan, Feb, or early March & the later you waited; the smaller the exit & the more nervous the elephants were going to be upon exiting. Pigs get Fat & Hogs get slaughtered - often trampled by the Institutional Elephants who run prices down on their exit, even faster than they run them up on their entries... I tried using both logic & emotion here.... logically; the $64 question was "why" would the Street pay more for eps & cfps streams going forward than they would here ? We've allready fallen from $35 Crude and Nat Gas has either allready peaked, or will in the next 60 days & that 60 day window is going to create an awfull lot of profit taking-selling any moment... the risk ramped exponentially each & every day while the potential rewards of higher highs fell proportionately each day we moved forward toward the end of peak winter heating demand season... This was a game of greed here of late - on who would blink first... the smart money allready left and refused to play the game and/or went short & will pick thru the remains and play the DCB long. In all seriousness - this was posterchild "Been here & done that" territory and I am very disappointed on how few threadsters picked up on it... We actually reached a new "contrarian" SI SD sentiment meter high imho. The cheerleading & pom pom waving reached new peaks & there was an emotional whirlwind built on greed that the Nat Gas crisis was taking us to some new unchartered territory. We aren't going to run out of nat gas folks - that's the first misconception here. Gas is rationed by price and we presently have a significantly higher number of rigs drilling for Nat Gas than we did last year and the biggest factor missed here - is that the slowing Economy will put the brakes on demand as well AND we are weeks & days away from Winter ending... which is game, set & match for this NG play. I won't argue with anyone that it may take 12-18 months, maybe even 30 months to normalize the NG crisis; but in this shoulder season those rig counts & the cap ex increases of the E&P's will begin to add supply and eliminate any crisis situation... Nat Gas the commodity is NOT going higher in May, June, July & August this year than prices we are going to exit from this winter & while next winter will be tight - we've had a historically harsh winter in the Midwest & there's a whole lotta gas drilling & exploration going on right now... so next Winter will NOT be a "Deja Vu" all over again scenario in that respect. Given that; this Nat Gas Crisis had "sell the news" tattoo'd all over its forehead people !... news that should have been sold into & averaged out of - and obviously so. Why would the street looking forward and seeing higher rig counts & drilling activity; increased cap ex spending into a slowing US Economy along with conservation efforts & fuel switching; and want to take these stocks to higher highs ? - especially since both Oil & Gas prices will be falling - hence; the E&P's will be sequentially reporting lower eps & cfps streams ? Once again; I couldn't have pounded the table any harder on it all being about the "peak" appearing on the horizon and NOT the "bottom" that would trigger the selloff. Did we learn anything here ? How about Oct '97 ? or, the June swoon of '98 ? or, the last E&P collapse in Sept '99 also into strong fundamentals ? or, the early Sept OSX peak of 140 being sold off strongly & being a near perfect 20:20 vison forward look at the entire winter peak demand season that ends in March... a coincidence that peak demand seasons ends in March and allmost exactly to the week; the OSX peaked 6 months earlier back in Sept - ie: the Street walked its talk via the sterotypical 6 mos forward looking valuation model ? The Street looked 6 mos out in deciding when to take profits here & this thread got caught being awfully nearsighted... Now; how do "you" pick up the pieces ? Do you continue to "re-act",or do you re-position yourself to be able to "act" ? If we hit OSX 110 do you all sell ? OSX 100 ? How about Oct 97 deja vu all over again - when the OSX took 4-5 months for its mid-cycle shakeout to ultimately bottom at OSX 80 from its earlier identical 140 levels ? - couldn't we see OSX 80 once again technically & fundamentally - especially given the slowing US economy & with the "recession" word being bandied about ? - you bet your ass we "could"... Would you continue to hold from this past Sept at OSX 140 all the way down to OSX 80 ? When, where and most importantly why would you sell ? ... doesn't leading vs following & selling into strength and "Averaging OUT" of Tops make more sense now - in mid, or late cycle; than trying to grind out that last bit of mo-mo juice & time the exact top ? Doesn't acting versus reacting leave one with a hell of a lot more options & choices ? Lessons learned ? ... fwiw; I doubt it. I've learned that 90% of all individual investors make the same mistakes over & over again. It's why Las Vegas exists - even when people know the odds are against them - they want the long shot, they want to double down one more time, for one more roll of the dice, or one more card... Emotion, not logic rules their day... But; without that human fraility & psychological weakness - one couldn't "trade the traders" and "that" is one of the most profitable games in town... Money Managment & Capital Preservation is perhaps the most important "fundamental" concept that many here ought to be focusing on now & in the future... Does the last man standing with loads of Cash at OSX 80; who wasn't fully invested & didn't hold all the way down from OSX 140 in Sept thru another Oct 97 Deja Vu allover again mid-cycle shakeout bottom; win this game, or what (VBG) ? Ciao ~