Stock Traders Corner — Oil and Gas Stocks Come to Life
In today’s Money Weekend…thin harvests…oil rebounds out of the buy zone again…Woodside may be turning the page…magnet trading breakout…and more…
I have spent the last two weeks after my vacation scouring the markets for new trading opportunities for members of my trading department Pivot trader.
After many hours of hard work going through my watchlists, I came back empty-handed, other than the opportunity I see developing in the oil and gas stocks I discuss below.
I called a few trader friends to discuss the lack of opportunities and received the same response from all of them. They all struggled to find compelling jobs, just like me.
One said that if you weren’t on board the key sectors that are working right now, it was too late to jump on it now and the rest of the market was adrift.
Fortunately, the Pivot trader The portfolio is exposed to uranium, nickel, lithium, rare earths and internet retail, all of which are under strong buying pressure. But I’m closer to taking profits in these positions than taking new ones.
I’m a technical analyst, so I try to ignore my instincts and listen to the charts, but something seems a little off to me in the current market. We have the impression of being close to a phase of profit taking.
The desire to trade can be overwhelming and lead to big mistakes. When the market isn’t offering great trading opportunities, it pays to listen to the market and sit on your hands until a great trade jumps out at you.
I keep telling people in my department that the market moves in cycles. Sometimes making money is as easy as shooting a fish in a barrel. Then all of a sudden the music stops, and it becomes nearly impossible to earn a penny.
Being in tune with the market and accepting whatever the market offers without trying to force things is the way to go. I think the best thing to do right now is to be patient and consider taking some money off the table if you’ve been running well over the past six months.
If I had a gun to my head and was forced to trade, I would focus on the oil and gas sector which is recovering from a steep drop last year during the COVID crash.
The technical chart for Oil looks solid and I expect the rally to continue and perhaps surprise on the upside.
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Oil rebounds out of the buy zone again
This is a monthly Brent crude oil price chart dating back nearly 30 years. If you have read my Trader’s Corner articles, you should understand that I am looking for reversals in key areas within the waves.
The chart above is a great example of why I use the levels I do to trade.
The huge rally from 1999 to 2008 is the wave I use to do my calculations. The buy zone is the 75-87.5% retracement of the wave. The sell zone is the 12.5-25% retracement.
Look at how many times over the past decade prices have respected the buy and sell zones.
The midpoint of the wave is the control point which acts as a magnet for trading.
We have just seen the third bounce out of the buy zone of the wave and there is a chance that we could see prices revisit the control point at $78.50 on this move.
Many oil and gas stocks have been beaten quite hard over the past year and will look cheap if prices continue to rise.
Woodside Petroleum Ltd. [ASX:WPL] gets a $500 million boost in earnings for every $10 jump in the price of oil (over the whole year), so it’s no wonder the stock is seeing a big rebound from oversold levels. The huge LNG price spike in Asia and Europe is also a boost for Woodside.
Their assets are quite mature and it is expected that they will enter a phase of declining gas reserves by the middle of the decade and will have to find other sources to fill their LNG infrastructure. However, the expected numbers for 2022 and beyond make them look pretty cheap.
Woodside may be turning a corner
This is a quarterly chart of Woodside over the past 30 years. The price has been falling since the crash of 2008. Notice how the COVID crash saw the price dip into the buy zone of the huge wave from 2003 to 2008?
It looks like Woodside’s price is moving back into the trading range of the past decade, and I don’t think it’s a stretch to target the $40 wave control point over the next few years. Woodies has long been a bad investment, but the two charts above tell me the worm may be spinning.
Magnetic Trading Workshop
If you want to understand my trading style on a deeper level, be sure to sign up for my four-day course “Magnetic Trading” Workshop which is running right now. The workshop started yesterday, but if you register now you will also have access to the first day workshop. It’s completely free and you will learn a lot about trading.
You will learn about all aspects of my trading model and how I use it to make money from the trading markets in a disciplined way.
We all want to make a lot of money, but if you don’t understand risk management, you’ll find yourself in all sorts of trouble at some point. My trading method is to map the position of traders and take advantage of their mistakes to gain access to powerful positions.
I use the price trend to signify coming back to create my initial targets, then I take profit and adjust my stop-loss to a point where I will break even on the entire trade. From then on, I can relax and enjoy the ride.
If you want to know how I do, register for the workshop here.
For silver weekend
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