Stock Market Snapback: Crude is Crucial!
When things look their worst, I’m usually buying with both hands.
Just look at oil stocks. Obviously, oil companies have suffered and many of them have continued to trade sideways near their lows. But the Nasdaq has already snapped back. The Dow and the S&P could easily begin to seriously attack their respective highs…
And I believe oil is an essential piece to this snapback puzzle.
If you look at the April oil crash, you’ll see the capitulation of all capitulations — complete f***ing nonsense. And I trade oil all the time! My brokerage companies were calling me before the meltdown saying, “Listen, you have to be out by Wednesday!” Everyone (well, almost everyone) was out before the epic crash. No one should have been trading that Monday when everything fell apart. Absolutely nobody!
What we witnessed was a complete capitulation. That’s how bottoms form in the markets!
What happened next? Crude has now jumped more than 275% since the meltdown.
If you look at the charts, it wouldn’t be inconceivable to see crude oil back at 40 bucks by the end of the year. Heck, we’re almost at $30 right now. If you look out to the distant futures contracts, we’re significantly above $30. Crude hitting $40 is not unreasonable at all. It could be one of the market’s stabilizing sectors — so that’s where I see a lot of opportunity!
This goes back to what I’ve been saying all along when it comes to trading what you see. There are always opportunities to trade. And no one — not you, me, or the Fed — knows what’s coming next.
But I know a great chance at a comeback when I see one. Oil’s post-meltdown rally is ready to deliver some serious gains…
Keep it In the Money,
Chart of the Day: Chopped to Bits!?
The stock market looked sluggish all week as the major averages retreated back to the recovery rally’s key support levels. Both the bears and bulls believe they have the upper hand as we finish up the trading week.
But what if both sides are dead wrong?
We’re beginning to see the gradual re-opening of some parts of the country, prompting some analysts to ask if the market will see this as a bullish turn of events. Will the epic run off the lows continue? Will the great re-opening turn into a “sell the news” situation?
Or are we about to enter the big chop?
Perhaps it’s time for some pain in the form of an unruly, choppy market. I think the market is going to throw us a few curve balls over the next several sessions. As of Thursday afternoon, the S&P 500 is holding tight above 2,800. But there are more than a few eyeballs on this so-called line in the sand — which means a strong possibility for fake-out moves in both directions before the market finds its way.
We can’t outsmart ourselves as the market chops some traders to bits. Be prepared for anything next week!
Trading Tip of the Day
Don’t gamble with your stocks. Execute a trade.
Eliminate the gambler’s mentality from your trading routine. It’s tempting to go “all-in” on a hot stock – especially when the market’s sprinting higher.
But a successful trader doesn’t push all his chips into the pot on a whim. He grinds out the wins, assessing all the possible outcomes and trades with a plan.
This plan should include best- and worst-case scenarios. These are your stop losses and profit targets. When a stock reaches your maximum acceptable loss, you sell. When a profit target is reached on a short-term trade, you take some profits off the table.
Having a set of rules and following them to the letter will keep losses to a minimum. Remember, you shouldn’t only avoid risky trades when the market isn’t cooperating.
Only trading the stocks that fit your stringent criteria is our ultimate goal – even in a rallying market.
— Greg Guenthner