A Safe Way to Net Double-Digit Gains in the Next 6 Weeks

A Safe Way to Net Double-Digit Gains in the Next 6 Weeks
By Jeff Clark
July 13, 2009

The oil market is a mess.

There's a glut of supply. Demand is suffering. The government is talking about cracking down on oil speculators. Who knows what the new cap and trade regulations will do to the industry? And the oil stocks have been crushed over the past month. The Amex Oil Index is down about 20% from its June 1 high.

I smell an opportunity.

Last month, we looked at the bullish percent index for the oil sector (BPENER) and determined it needed more time to give us a buy signal. Here's an updated chart...

BPENER is a momentum-based indicator that generates buy and sell signals based on oversold and overbought conditions. The oil sector is overbought when BPENER rallies above 70 and then turns lower. The four most recent sell signals are marked with red circles. Each signal was profitable for anyone taking a short position on the oil sector.

The oil sector is oversold whenever BPENER drops below 20. It generates a buy signal (the blue circles) when it turns higher from oversold levels. The last time we got a buy signal from this indicator, back in March, my Advanced Income subscribers took on three trades. Each of them generated at least a 25% return in just one week.

We are facing similar oversold conditions today.

Ideally, I'd prefer BPENER to drop below 10 before turning higher and giving us a buy signal. But as you can see from the rising gray trendline on the chart, last week's reading of 13.64 may be as close as we get.

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Oil stocks are drastically oversold. BPENER hasn't turned higher yet, so we may not have seen the absolute bottom for the sector. But we're close enough to give us a low-risk trade for the next couple of months.

The overall market still has some downside action left before its correction is over. But oil stocks turned higher ahead of the market back in March. Given the drubbing they've taken recently, I suspect oil stocks will do the same this time as well.

Best regards and good trading,

Jeff Clark

P.S. I just told Advanced Income readers about my two favorite ways to trade an oil stock rebound. Both are incredible risk/reward setups... and both trades pay you cash up front. I expect to safely make 30% in the next six weeks. For more on becoming an Advanced Income subscriber, click here.

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•	Corporate bonds enjoy amazing recovery... major bond ETF hits new 52-week high.
•	Oil slices through $60 on Friday... down 18% in the past month.
•	Silver suffers: Silver ETF down 21% since June 1... nearing 3-month low.
•	Earnings today... CSX, Fastenal, Novellus.

	Last	Change	52-Wk
S&P 500	877.82	-0.55%	-29.96%
Oil (USO)	32.31	-1.40%	-71.74%
Gold (GLD)	89.68	+0.19%	-4.12%
Silver (SLV)	12.49	-1.42%	-31.07%
U.S. Dollar	80.13	+0.26%	+10.53%
Euro	1.39	-0.58%	-11.68%
VIX	29.38	-1.34%	+14.81%
HUI	315.42	+0.36%	-27.09%
10-Year Yield	3.30%	-0.10	-0.44

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Company	Sym	Industry
Female Health	FHCO	personal products
Helix Wind	HLXW	wind turbines
Aixtron	AIXG	machinery
Hickory Tech	HTCO	telecom
Dyncorp Intl	DCP	business services
BioTime	BTIM	biotech
SXC Health	SXCI	health IT
Bio Extraction	BXIXF	research services
99 Cents Only	NDN	dollar stores
Vortex Resources	VXRC	oil & gas drilling
Schweitzer Mauduit	SWM	paper products
Invesco Mortgage	IVR	virtual bank

Company	Sym	Industry
Danaos	DAC	shipping
NL Industries	NL	synthetics
CIT Group	CIT	business lending
Sterling Bancorp	STL	bank
First BanCorp	FBP	bank
San Juan Basin	SJT	royalty trust
Nabi Biopharma	NABI	biotech
Pinnacle Financial	PNFP	bank
Energy Conversion	ENER	semiconductors
Bronco Drilling	BRNC	oil & gas drilling
Citizens	CIA	insurance
Popular	BPOP	bank
Chemspec	CPC	chemicals
Hansen Medical	HNSN	medical devices
GTx	GTXI	biotech
CVB Financial	CVBF	bank
Graymark	GRMH	health services
HeartWare Intl	HTWR	medical devices
Susquehanna	SUSQ	bank
Myriad Genetics	MYGN	diagnostics
Harleysville Natl	HNBC	bank
Heckmann	HEK	acquisitions
APP Pharma	ABII	biotech

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