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It’s Time to Bet On A Rebound In Oil

By Jeff Clark
Thursday, 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
 




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Market Watch
Symbol Price
Change
52-Wk
S&P 500 1224.71 +0.3% +11.4%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.19 -0.6% +7.2%
Euro 1.34 +1.4% -11.0%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%