You Should Think Twice Before Buying This Sector...
Jeff Clark
May 12, 2009
The oil rally is solid.
The price of a barrel of West Texas Crude is up 100% since its bottom last December. By the look of the following chart, there are more gains to come...
The chart has broken above resistance at $55, and there should be enough momentum to take it all the way to $70. So if you're long oil, then stay long.
But if you're thinking about buying oil stocks now, you better think again. The single best oil stock timing indicator is flashing a warning sign...
A bullish percent index (BPI) is a measure of overbought and oversold conditions. A sector is oversold when the index dips below 30, and it's overbought when the index rallies above 80. The best market timing signals, however, come when the BPI reaches truly extreme conditions.
For example, the best buy signals in the oil sector occur when the BPENER dips below 10 – as it did in October, November, and March. Each of those signals generated 25% gains in the AMEX Oil Index in just a few weeks.
The best sell signals in oil are when the BPENER runs near 90 and above. You can see how the two previous sell signals played out on this chart...
Yesterday, the bullish percent index for the energy sector closed above 93. That means 93% of the stocks in the energy sector are trading in bullish chart formations. That's an extreme reading... And it doesn't leave much more room for additional momentum to carry it higher. In fact, it increases the likelihood of a strong selloff in the oil sector.
So even though oil itself looks ready to run higher, the stocks are in the danger zone. We'll likely have a better opportunity to buy them a couple months from now.
Best regards and good trading,
Jeff Clark |
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| • |
Seabridge gold hits 52-week high... up 244% from October 08 low. |
| • |
Green Mountain up 60% in two weeks... Coffee maker has doubled this year. |
| • |
Hansen at another 52-week high... Earnings surprise boosts soft-drink maker 15% in two days. |
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Earnings today... Applied Materials, BMC Software, Fossil, Hitachi, MBIA, Nissan, Ticketmaster, Warnaco. |
|
Last |
Change |
52-Wk |
| S&P 500 |
909.24 |
-2.15% |
-34.51% |
| Oil (USO) |
32.29 |
-0.62% |
-68.38% |
| Gold (GLD) |
89.69 |
-0.32% |
+2.60% |
| Silver (SLV) |
13.74 |
-0.36% |
-17.55% |
| U.S. Dollar |
87.95 |
+0.24% |
+19.30% |
| Euro |
1.37 |
+0.63% |
-12.14% |
| VIX |
32.87 |
+2.56% |
+69.35% |
| HUI |
341.69 |
-0.48% |
-19.22% |
| 10-Year Yield |
3.18% |
-0.11 |
-0.50 |
|
| Company |
Sym |
Industry |
ZAGG |
ZAGG |
consumer prods |
American Technology |
ATCO |
acoustics |
BioDelivery Sciences |
BDSI |
pharma |
NeurogesX |
NGSX |
biotech |
Orion Marine Group |
OMGI |
marine constr. |
BWAY Holding |
BWY |
packaging |
California First Nat'l |
CFNB |
bank |
Vanda Pharma |
VNDA |
pharma |
VNUS Medical |
VNUS |
medical devices |
Transcept Pharma |
TSPT |
pharma |
Velcro Industries |
VELC |
Velcro |
Cott |
COT |
beverages |
Cubic |
CUB |
defense tech |
Hansen Natural |
HANS |
soft drinks |
Hemispherx |
HEB |
biotech |
Health Mgmt Sys |
HMSY |
health care |
MannKind |
MNKD |
biotech |
NeurogesX |
NGSX |
biotech |
Orion Marine Group |
OMGI |
marine constr. |
RehabCare Group |
RHB |
health care |
Seabridge Gold |
SA |
exploration |
Willis Lease |
WLFC |
aircraft leasing |
Spectrum Pharma |
SPPI |
pharma |
Green Mountain |
GMCR |
coffee |
Gander Mountain |
GMTN |
sporting goods |
D&E Communications |
DECC |
telecom |
Duncan Energy |
DEP |
natural gas |
Seneca Foods Corp. |
SENEA |
fruit products |
|
| Company |
Sym |
Industry |
None |
|
|
|
|
| Customer Service: 1-888-261-2693 – Copyright 2009 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202 |
