Energy & Commodities
The trading action on Friday was very important for junior oils—and very bullish.
The market rallied strongly, in spite of disappointment out of Europe on Thursday.
What’s even more impressive is the fact that traders were willing to buy big, and take on risk, before a long weekend.
But here’s what has just triggered my buy signal:
I saw double and triple crossovers of moving averages — such as the 10-day moving average (dma) moving above the 20 dma AND the 50 dma.
These tend to be more reliable signals, as they provide essentially smoothed data, and less frequent signals.
You see, this is one of those times when great investors flourish… seizing opportunities that can increase their portfolios by magnitudes.
Fortunately I know the one junior oil producer that could excel the greatest in this uptrend.
It is growing the fastest, and the most profitably, of almost any other junior in Canada.
It’s my favourite North American oil stock for 2012; I see a lot of upside this year for the stock, in light of its strong and profitable production growth.
In fact the way this play has come together up to this moment is striking…
Last year the company acquired a huge oil resource—and was able to produce more per well than ever before.
They brought in cash through smart Joint Venture agreements… and have blown the market away with much better drilling success than investors expected. And the numbers continue to get better by the quarter.
They have low debt, high growth; they have both the balance sheet and the income to withstand market volatility.
On the whole, it’s a tremendous set-up for OGIB subscribers to win.
And you can prepare yourself to take advantage – of what could be a bullish run in the markets – by reading my free research right here.
Kind regards,
Keith Schaefer
Publisher, the Oil & Gas Investments Bulletin
GOLD- ACTION ALERT – BULL
Gold rallied yesterday as the Dollar fell. Gold rose 8.00 to 1611.60. But, why do I get the feeling that the rug can be pulled out from under us at almost at anytime? If you’ve been following the circus at the CFTC and Bart Chilton’s pilgrimage to get to the bottom of what appears to be blatant manipulation of the silver market (as well as gold), you know traders are watching very carefully. Chilton said yesterday (despite the weekend story from London’s Financial Times that the CFTC was going to drop the investigation) “I continue to believe, consistent with my previous statements and information from the public, that there have been devious efforts related to moving the price of silver. There have also been silver and gold market anomalies outside of the silver investigation window that have raised, and continue to raise, market concerns.” As you know, there is a strong inference that the manipulation is being done at the bequest of the U.S. Government and JP Morgan is simply a ‘broker’ taking orders. I cannot imagine the U.S. Government being exposed here simply because they would argue it can’t happen due to ‘national security issues’ and the whole matter would simply be hushed up. Though silver could rally on the anticipation of a positive outcome (the government is exposed), more than likely silver bulls will be disappointed and the market could nosedive to new lows instead.
Though seasonal studies and my own Annual Forecast Model along with current bearish sentiment (especially in the gold mining shares) suggest we should remain overall optimistic (forgetting the risk of a Fall shakeout). It’s like building a mental bomb shelter you never use. If you believe as I do that we cannot discount the viciousness of our adversaries, Bernanke and Geithner could attempt to drive gold toward 1300 using the ‘phony’ paper market at the COMEX/CME in order to discredit gold as a viable alternative to progressively worthless Dollars. With gold suppression schemes underway for decades (gata.org has the documented proof, if you care to read it), nothing is really new here. It appears 1520 on the low end and 1635-1650 on the upper define near-term trigger points for the bears and the bulls. In silver 26.00 has been surprisingly holding, while the upside breakout would have to be over 31.00-32.00 in my opinion.
Should we see a waterfall decline in either gold or silver, we have to be prepared to back the truck up for a huge buying opportunity. The availability of physical metal, however, at severely discounted ‘phony’ prices engineered in the paper market may be a big problem. Do you think physical holders of gold and silver are going to sell for worthless paper currency at bargain basement prices? Good luck. You might get a few coins, but don’t hold your breath.
Recall, gold hit an all-time record high of 1922.20 on September 6, 2011, but fell to a 6-month low of 1521.80 on December 29. These are the two important benchmarks that traders and investors are focusing on at this time. Gold stocks are a special opportunity because by certain valuation metrics, they are cheaper than their 2008 lows and are as cheap as they have ever been. The 12-year bull is going to continue, driven by central bank purchases, currency destruction, movement away from the U.S. Dollar as the world’s Reserve Currency and the general momentum of a bull market.
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This week’s Market Minutes video discusses how to know when the market is likely to produce good trades, check it out by clicking here.
There are many who consider trading the stock market to be a form of gambling. Quite truthfully, the way many people trade the stock market it is a form of gambling. Legal, easily accessible and perhaps more addictive than a slot machine, I have seen many people suffer great financial loss in the pursuit of easy market profits. How is it that trading can be gambling for some and a legitimate income source for others?
Because, for most, the value of the outcome of their trades in not known before the trade is made. We all understand that what happens with stock price is uncertain but that does not mean it is not predictable. A gambling trader may hope that he or she makes money on their trades but the professional trader knows what he expects to make on the trade. They know the expected value of the trade.
Suppose you devise a trading system that says buy any time the 20 day moving average crosses above the 40 day moving average and the volume is at least double the 20 day volume average (I have no idea if this is a good strategy, I doubt it so don’t try trading it). You then test your trading strategy along with some rules for exit and find that, over a sample of 300 trades, the average profit was $410 and the average loss was $230. Profits happened 67% of the time so, of course, losses occurred 33% of the time (again, all hypothetical).
The pro trader recognizes this as a money making system (it should be noted that the statistics above are not all that a person needs to consider when assessing whether a strategy is effective, I just want to keep it simple for this discussion). The expected value of a trade is as follows:
Probability of profit times the average profit – the probability of loss times the average loss so for this example;
0.67 times $410 – 0.33 times $230 = $198.80.
The trader who does this analysis finds that this simple strategy is expected to make them $198.80 each time they make a trade. While they do not know if the next trade will be profitable or not, they can predict what the profit should average out to over a large sample of trades, provided that what has happened in the past continues to happen in the future.
So, let me now ask if you know the expected value of the trades you make?
If you answer no then you may be a gambler. I say may because some traders may not have tested their rules to know the expected value but have still proven in their actual trading history that their strategy has a positive expected value.
In short, if you have no idea if your trading rules actually work or if you don’t even have a set of rules, relying instead on gut feel, then you are gambling at the stock market casino. Sadly, this casino will not comp you a room or give you free drinks when you play.
Successful trading involves taking risks; we are probably never certain of what the outcome of our next trade will be. Taking risk is necessary if we are hoping to make a return. However, there is a difference between taking risks and being reckless.
Think about what it means to be reckless. I like to mountain bike, race cars and fly planes; all things that most consider to be risky. But when I am on my bike, I don’t try to do 75 foot gap jumps like Matt Hunter, I don’t go 200 mph in to a corner like Lewis Hamilton, I don’t do wing to wing aerobatic maneuvers like the Snowbirds. I work within my abilities and limits and in doing so, avoid letting risk turn in to recklessness.
Buying a stock without knowing the expected value of the trade is reckless, it is gambling. Additionally, what is a simple risk for one person may be reckless for another. You have to know what your limits are and work within them. I may trade a strategy which has a positive expected value and not be reckless but if the experience required to execute that strategy is beyond your limits then trading it for you would be reckless.
If you want to be a successful trader you have to stop gambling and make sure you are trading with an expected outcome that is positive. You need to work within the limits of your skills and experience and avoid being reckless.
I did a number of Market Scans on Stockscores.com tonight to find stocks that had decent charts, including the Abnormal Breaks and Stockscores Simple strategies. Here are a few stocks that I think are worth keeping an eye on, their charts show good potential.
1. GSS
GSS broke out from a pennant pattern today with strong volume and abnormal price action. This move takes it through its downward trend line, making the chart a good turnaround candidate. Support at $1.09.
2. WAL
WAL is breaking to new highs for the year and has a very good long term weekly chart showing signs of a turnaround. Support at $8.85.
3. GPOR
GPOR breaks from an ascending triangle pattern after breaking its long term downward trend line a few weeks ago. The Sentiment Stockscore has recently crossed above 60. Support at $19.50.
References
- Get the Stockscore on any of over 20,000 North American stocks.
- Background on the theories used by Stockscores.
- Strategies that can help you find new opportunities.
- Scan the market using extensive filter criteria.
- Build a portfolio of stocks and view a slide show of their charts.
- See which sectors are leading the market, and their components.
Disclaimer
This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.
f you’re an oil billionaire, who do you turn to for advice?
Oil billionaires Gordon Getty and T. Boone Pickens have turned to a man named Kurt Wulff…
Kurt is “in his sixth decade of analyzing opportunities in the oil and gas industry,” according to his online bio. He doesn’t seem to be slowing down…
At DailyWealth, we love his work. He actually provides much of his work – for free, after a delay of a couple weeks – on his website www.McDep.com.
A few weeks ago, he wrote up a Norwegian oil company as a “Contrarian Buy.”
| I’m talking about oil and gas producer Statoil.
Kurt pegs Statoil’s fair value at $44 per share – 79% higher than its share price today. Statoil also pays a near-4% dividend. The company has made “a string of new discoveries on top of growing production from past discoveries,” Kurt explains. The story is not limited to the oil off the coast of Norway either: “… other prospects in the U.S. and Canada may contribute 20% of corporate production by about 2020.” Your downside risk is limited, as Statoil has “modest debt” and is based in (and taxed in) “one of the financially strongest countries in the world.” Kurt’s biggest reason for concern at the time of his initial write-up in June was that Statoil’s shares were in a downtrend. But fortunately, that has changed. In DailyWealth, we prefer to see some semblance of an uptrend – as confirmation that our idea is on the right track – before we pile into an investment idea. We like the fact that Kurt Wulff thinks the same way. Shares of Statoil bottomed for this year in June, the same month of his write-up. The shares have been in an uptrend since. The danger of buying into a downtrend has passed… It appears Kurt will get this one right. On a risk-to-reward basis, you can set up a smart trade in Statoil with the odds stacked in your favor. For example, you can set your stop-loss at the June lows (the closing low for 2012), which is only about 10% down from today’s price. Meanwhile, your upside potential – if Kurt is right – is about 79% from here. If you’re a regular DailyWealth reader, you know some of my colleagues have expressed their concerns about oil prices – and the risk that oil prices may fall… But by using a 10% stop-loss, you will be out of the trade if Kurt is wrong. So you have 10% downside and 79% upside. The setup hardly gets better. Check out Kurt Wulff’s work at www.McDep.com. Poke around at his income ideas… learn about his “McDep ratio”… and read his Statoil write-up. I am no expert in oil and gas… But I like Kurt’s work… the uptrend is here… and the risk-to-reward profile here is right. Check it out. Good investing, Steve |
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