Trading this market/ Energy

[aiki14]

In such a tough to predict market where the whipsaws are so pronounced and the reversals so rapid where do we find islands of predictability?

I have no idea.

But i will attempt to get a hedge for myself with some external data that will move markets in a predictable fashion. When I am getting so many mixed readings I usually fall back to energy. The Oil inventory numbers come out on wednesdays and I try to figure out the likely direction for crude inventories. This time of year is a good time for this.
My theory is that due to high temperatures in the northeast where 70% of the nations heating oil is used, we will see an increase in inventories of crude.
Also I look in the news to see if there is anything to indicate any events in the refineries that would affect distillates, refinery rates, or capacities.
I'll do that this evening, and I hope others here who have a better hold on this sector than I will help out, TonyM is tuned into the sector and I hope he sees this.

My preliminary idea is to be short the congloms and the drillers, and long the refiners for tomorrow. I will spend the next few hours digging and post as I refine my ideas.

Please feel free to contribute.

[aiki14]

Reference sites
http://www.oilonline.com/index.php

These guys are having a special on a yearly subscription, now 69 was 200, but the free stuff is also helpful
http://www.wtrg.com/index.html#Crude

http://www.seekingalpha.com/tag/oil-price

[englishman26]

Not to rain on your parade or anything, but this whole catalyst based analysis seems somewhat flawed at the moment. I mean, for instance, Iranian boats threaten US ships in the straight of Hormuz, and the price of oil dropped, yesterday.

I've also noticed recently a complete lack of consistent reaction to the oil data that comes out on wednesdays. I don't know whether this is because CNBC reports the estimates wrong or what but sometimes the market reacts the way you'd expect, and sometimes it's a selling the news, type reaction. The disconnection of oil supply to gasoline supply further complicates the matter. Either way, the direction takes after the data often reverses within a hour or two. It's almost farcical.

I don't mean to be defeatest but I just think that this short term prediction type trading of oil and oil stocks is very very difficult at the moment. Good luck!

Long term, I still think the drillers and discoverers are the best bet - eg. schlumberger (SLB), and transocean (RIG) perhaps the oil producers with more diversity and growth potential, like Devon (DVN).

But if you really want predictability and safety, the things have have performed easiest for me over the last 6 months have been DBA and IAU - food and gold ETFs. They pretty much ignore the rest of the market and don't even really have shorterm swings (But I digress).

The opposite of this is the fun you can with a speculative oil like BQI - still prices targets of between $7.50 and $20 roaming around so this being at around $4 is bargain basement - plus risk - which the market clearly doesn't like at the moment!

GLTA!

[englishman26]

From your links:

http://www.seekingalpha.com/article/59334-oil-price-and-gold-price-what-s-the-connection

I'd just buy gold, gold stocks, or a gold ETF instead!

[aiki14]

Not to rain on your parade or anything, but this whole catalyst based analysis seems somewhat flawed at the moment. I mean, for instance, Iranian boats threaten US ships in the straight of Hormuz, and the price of oil dropped, yesterday.

I've also noticed recently a complete lack of consistent reaction to the oil data that comes out on wednesdays. I don't know whether this is because CNBC reports the estimates wrong or what but sometimes the market reacts the way you'd expect, and sometimes it's a selling the news, type reaction. The disconnection of oil supply to gasoline supply further complicates the matter. Either way, the direction takes after the data often reverses within a hour or two. It's almost farcical.

I don't mean to be defeatest but I just think that this short term prediction type trading of oil and oil stocks is very very difficult at the moment. Good luck!

Long term, I still think the drillers and discoverers are the best bet - eg. schlumberger (SLB), and transocean (RIG) perhaps the oil producers with more diversity and growth potential, like Devon (DVN).

But if you really want predictability and safety, the things have have performed easiest for me over the last 6 months have been DBA and IAU - food and gold ETFs. They pretty much ignore the rest of the market and don't even really have shorterm swings (But I digress).

The opposite of this is the fun you can with a speculative oil like BQI - still prices targets of between $7.50 and $20 roaming around so this being at around $4 is bargain basement - plus risk - which the market clearly doesn't like at the moment!

GLTA!

I didn't say it was gonna be easy! I gotta trade something so I analyze. Still not locked into any plays.

[TonyM]

My take on energy is that the fundamentals are not the primary moving force at the moment. For example on Monday CL fell back quite a bit, now if you read Bloomberg's explanation it was because of the anticipation of slower growth and demand. I mentioned to my visiting brother's father-in-law (an avid market studier and investor who lives in Canada) that they were full of it, and maybe crude would drop back to $90 before another shot at a solid punch through $100. So here we are today with the new story of crude being bought as a hedge against inflation, what happened to slower growth in '08?

Ok so that is just a brief explanation of why I have to discount all media reasons for direction of crude. I did however notice on the day that crude broke $100 that the floor traders on the Nymex floor were quite giddy with pleasure. I think the game is to run the price up several dollars, take profits and sell, maybe even go short and then cover and go long again after a 3% or so pullback...rinse and repeat.

Iirc, back in October an analyst at GS had a longer term target of $135 and also added that that level should not be considered a top. On their previous call for $95 I doubted them and thought they were trying to unload, I was wrong, Blankenfein and his $64M bonus were right, I'm a believer.

Think back to august '06, media was awash with the story that oil demand is always down after Labor day and that crude will fall back, and it did, of course GS unloaded their hefty position to help create the plummet to $49 by approximately this time last year.

Ok, so big deal, I'm bullish long term, no surprise there and I'm not really going out on a limb by any stretch. So which sub-sector to get behind? I think services & equipment will continue to be in demand and the refiners are relatively cheap now, and the refining margins have been on the increase since October even with increased crude prices. In fact if we look at the April RBOB futures we can see it is currently @ $2.63 vs $2.47 today. It only takes a refinery malfunction here or there to move refiner stocks in grand fashion, although the services stocks are likely less risky. I made a thread about WNR which didn't seem to grab anyone's fancy in particular, but this thing has sold off so much and can generate such huge gains (up and down) in a single day that I think any trader would be wise to at least add it to the oil watch list and keep tabs on it. I also still think they may get a buyout or merger offer at these low stock price levels.

I probably like more risk in this sector than most care for, but as I was saying to a fellow trading pal the other day...I remember when I was trading HES back and forth when it was in the upper $40s, I could have kept my 1k shares and took a year off and doubled my money. Just don't listen to the media hype, but pay attention when the envy of Wall Street speaks.

[AJLightning]

CNQ (Canada)
KWK (Michigan)

[Luc1Grunt]

I learned a few things from bracketing the last fed speak and subsequent plunge. I may look at a bracket again with limits on both sides of a few biggies.

XLE, but not sure of which stocks. I hate to jinx my beloved CVX (in my mind), but I'll search out a few more volatile stocks for posting.

Swing trading is an ulcer producing event in this current market for this guy. My comfort level is intra-day and more so with the added volatility.

[BentleyVTech]

Since this thread is related to energy...what are your thoughts on energy companies that are pursuing new nuclear plants?

I work for a company on the east coast that has already begun much of the initial legalities to begin construction of a new nuclear reactor. With all of this focus on green energy...nuclear is great. But I understand that there hasn't been a new reactor built since the early 80s/late 70s. So I know there comes a lot of risk as well...

If this thing does go through, and if it is successful...how long till you suspect good returns?! Thanks

[aiki14]

Since this thread is related to energy...what are your thoughts on energy companies that are pursuing new nuclear plants?

I work for a company on the east coast that has already begun much of the initial legalities to begin construction of a new nuclear reactor. With all of this focus on green energy...nuclear is great. But I understand that there hasn't been a new reactor built since the early 80s/late 70s. So I know there comes a lot of risk as well...

If this thing does go through, and if it is successful...how long till you suspect good returns?! Thanks

Time frame from proposal through permit to production is very long. 10yrs or more. Public support is questionable, and will be more questionable in a democrat administration. Hard to pick any near term entry that would be sensible based solely on this criteria, any company even remotely capable of pulling off the deal is already too big to "get in at the beginning", and any pin action play is well off in the distance.

[englishman26]

What did you decide to do on this in the end?

I did okay with GSS, IAU, DBA, and BQI this week. Like I said, it's hard to figure out the energy plot at the moment.

Nat. gas. started to run. Anyone buying the likes of CHK?

[aiki14]

What did you decide to do on this in the end?

I did okay with GSS, IAU, DBA, and BQI this week. Like I said, it's hard to figure out the energy plot at the moment.

Nat. gas. started to run. Anyone buying the likes of CHK?

I stayed on the sideline. I couldn't generate enough conviction to make a play either way.

[englishman26]

I stayed on the sideline. I couldn't generate enough conviction to make a play either way.

Yeah - that's roughly my problem in this area at the moment.

[aiki14]

Yeah - that's roughly my problem in this area at the moment.

It's too bad since my initial thinking was essentially correct. Nothing like thinking your way out of winning positions.