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Sunday, December 21, 2008

Oil

These next two weeks are bound to be very interesting. The market is declining, but over-all sentiment is still bullish for next few months.

On any strength, I may buy some FAS, to get some quick gains. I like GDX still, but I am now waiting for a pullback to get back into the stock. I'll buy some at 28, but target for buying at any significance is 25.

As I indicated on Friday, went for OIL. Why? Mainly because the price of Oil is being beaten back to the stone ages. Oil finally broke 40 bucks a barrel, which is NOT a good sign for oil. I am NOT expecting oil to break 65 bucks a barrel in 2009, as long as inflation is kept in check.

But at 36 bucks a barrel, the "risk to reward" on up side is becoming greater than the downside. Oil MAY go to 25 bucks a barrel. But with any breaking news, Oil could quickly pop back to 60.

I don't like oil companies since Year over Year profits will be hard to beat when they report. Also Obama may put a pinch on oil companies (taxes). OIH is a good ETF for oil companies, if you like that play.

But if the US dollar at anytime becomes less than desirable by the world, commodity prices should rise as the US dollar falls.

DXO & UCO are double long stock ETF's, only buy if willing to take the higher probability of loss.

The conservative play is to buy USO , some at 33, 31, 29, 27, 25 levels and scale in at greater numbers on the way down, like 100, 200, 400, 800, 1500, etc, to ensure you get a good adveraged price. If your willing to hold for a year, I can't see how this loses, but the near term pop is a risky play.

See chart on USO to the right.
I'll try to make time to get back to basics and post a summary on the news over the holidays.

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