Customer Service 1 (888) 261-2693
Advanced Search

Take Profits in This Sector Now

By Jeff Clark
Tuesday, July 31, 2012

Oil stocks have had a great run. Now it's time for a rest... or maybe something a little worse.
 
The AMEX Oil Index is up 10% since I suggested buying into the sector last month. That was a good trade – set up by the oversold look of the oil sector bullish percent index (BPENER). But now the index isn't oversold anymore. In fact, it's darn close to being overbought.
 
Take a look...
 
The blue circles on the chart below show the three buy signals BPENER generated last month. The first two never really gained any traction... But the third signal exploded to the upside and oil stocks have enjoyed a year of gains in just one month.  
 
 
 
Traders should take profits now.
 
Anything above 80 on the BPENER indicates an overbought condition. Once the index reaches into overbought territory and turns lower, it'll generate a sell signal.
 
On Friday, the BPENER closed at about 73. So we're not in the "danger zone" just yet... But we're close.  
 
And given my colleague Matt Badiali's longer-term bearishness on the sector, it's probably better to be a little bit early getting out of this trade than to be a little bit late.
 
In this stock market environment – where every European headline, government report, and central banker comment can cause violent swings in stock prices – traders need to focus more on protecting profits than trying to maximize them. That's why I'm booking my oil profits now.
 
It's not time to go short the sector just yet. That time will come. But the BPENER needs to rally a bit more first. For now, take your profits. I'll let you know when it makes sense to go short.
 
Best regards and good trading, 
 
Jeff Clark




Further Reading:

A month ago, Jeff told readers to buy oil stocks. Traders who took his advice booked quick, double-digit gains. Read more here: A New Buy Signal for Oil Stocks.
 
Resource expert and geologist Matt Badiali predicts a tough road ahead for oil prices. In April, he predicted a pullback in oil. And prices sank 15% over the next two months. Now, he says the stuff has even more downside ahead... Find his long-term thesis here.

In The Daily Crux
Market Notes
Another bullish sign of a "stealth" biotech boom... giant Amgen breaks out to a new all-time high.  
 
Steel Dynamics touches a three-month high.  
 
Solar companies are still a terrible investment... SunPower, Yingli Green Energy, and Suntech Power plunge to fresh all-time lows.
 
"Digital Wallet" play Visa soars to an all-time high... up more than 50% in a year.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1385.30 -0.1% +7.2%
Oil (USO) 33.45 -0.7% -10.6%
Gold (GLD) 157.43 -0.1% -0.5%
Silver (SLV) 27.36 +1.5% -29.6%
U.S. Dollar 82.80 +0.2% +11.6%
Euro 1.23 -0.1% -14.5%
Volatility (^VIX) 18.03 +8.0% -28.6%
Gold Stocks (^HUI) 417.49 +1.4% -23.2%
10-Year Yield 1.50 -3.9% -46.6%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 138.68 +0.0% +9.5%
S. Africa (EZA) 66.12 -0.6% -2.0%
Singapore (EWS) 13.16 +0.3% -4.6%
Lat.America (ILF) 42.67 -0.2% -11.1%
Canada (EWC) 26.60 +0.3% -12.1%
Japan (EWJ) 9.00 -0.6% -14.1%
S. Korea (EWY) 54.53 -0.7% -16.4%
Taiwan (EWT) 12.09 -0.5% -16.8%
China (FXI) 34.06 -0.2% -17.4%
Israel (ISL) 12.13 +2.2% -23.7%
India (IFN) 20.69 +1.5% -28.0%
Russia (TRF) 14.22 +0.0% -33.8%

Sector ETFs
Symbol Price
Change
52-Wk
Retail (PMR) 24.63 +0.0% +19.9%
Utilities (XLU) 38.23 +0.4% +18.8%
Consumer Svcs (IYC) 82.21 0.0% +16.0%
Health Care (IYH) 80.78 -0.6% +15.9%
Big Tech (QQQQ) 64.82 -0.1% +12.8%
Real Estate (IYR) 65.50 +0.3% +12.7%
Construction (PKB) 13.98 +1.2% +12.6%
Biotech (PBE) 23.29 -2.6% +10.5%
Industrials (IYJ) 68.43 -0.3% +6.3%
Software (PSJ) 26.04 -0.8% +4.9%
Telecom (IYZ) 23.80 +0.8% +4.8%
Media (PBS) 15.09 -0.7% +4.7%
Financials (IYF) 55.62 -0.1% +3.9%
Insurance (PIC) 15.89 +0.8% +2.2%
Water (PHO) 18.57 -0.6% +1.5%
Defense (PPA) 19.06 -0.2% +1.5%
Oil Service (OIH) 39.97 +0.1% +0.0%
Big Pharma (PPH) 39.69 -0.6% +0.0%
Transportation (IYT) 91.28 -0.3% -0.7%
Semis (PSI) 14.46 -1.2% -4.3%
Basic Mat (IYM) 63.94 +0.1% -15.3%
Nanotech (PXN) 6.06 -0.7% -25.6%
Alt. Energy (PBW) 4.01 -1.0% -49.2%

Recent Articles