It’s Time to Bet On A Rebound In Oil
by Jeff Clark
September 28, 2006
Last Monday, I turned bullish on oil.
I know that must seem strange since it was just a few weeks ago that I wrote about how bearish I was on the slippery black stuff.
Indeed, my Short Report subscribers rode the oil slide all the way down to gains of almost 20% in just six weeks with our short sale of the US Oil Fund (USO). We covered that trade last week, and then - just this past Monday - I wrote the following in The Short Report…
“Oil and oil stocks are amazingly oversold and a large bounce is inevitable.
As bullish as everyone was on oil when we shorted shares of US Oil Fund (USO) last month it pales in comparison with how bearish everyone is today.
Indeed, only about six weeks ago you could turn on CNBC and hear analyst after analyst talk about how oil was an odds on bet to hit $100 per barrel. Today, the magic number for those same analysts is $50.
The talking heads were absolutely giddy this morning when oil fell below $60. And the one thing I’ve learned by watching the business media over the past twenty years is to take the other side of whatever the media is obsessing about.
The media is now obsessed with falling oil prices. That tells me we’re set up for a pretty significant bounce starting any day. And, the bounce is going to show up first in the oil stocks.”
I ended the report by giving my single best trading idea in the oil sector.
The Trading Gods must have been feeling generous on Tuesday morning. The oil stocks, as represented by the Oil Services ETF (OIH), declined briefly at the opening but quickly turned around and are now about 7% higher.
As for my single best trading idea? It’s up 60% in just two days.
Granted, two good days in the oil patch do not necessarily make for a sustainable trend. But given the severity of the recent decline and the overwhelmingly bearish sentiment, my sense is it’s just the beginning of a tradable rally…
Best Regards and Good Trading,
Jeff Clark
