Adam and I had an interesting discussion today about oil and gas prices, as today's trading patterns were both volatile and perplexing.

On one hand, crude futures topped $64 a barrel at the same time that natural gas prices dropped to a two-year low under $7 per million British thermal unit.

These two countermoves were based on a U.S. government report that showed declines in crude supplies and increases in distillate supplies. Looking at the trends, this marked the Energy Department's fourth-weekly decline in U.S. crude supplies while witnessing the first distillate-inventory climb in 11 weeks.

But what was interesting to me was that the major oil names like Exxon, Chevron, and Marathon Oil all dropped in today's trading. In fact, the entire oil service sector experienced a sharp midday sell-off despite rising oil prices that are projected to be in the $62-67 range through the first quarter of 2007.

Was this news already factored into the stock prices? I don't think so. In fact, I think today's drops are giving you a very nice entry point. You see, as Adam and I discussed this interesting trading pattern, we decided to focus our WOW charting on the oil sector as we prepare for next week's play.

After all, we've had great success playing January calls on names like

Halliburton (HAL:NYSE) and the Energy Select Sector SPDR (XLE:AMEX), but now that those assets have been retired, it looks like the ideal time to get repositioned as we head into the 2007 calendar year. Although Adam and I disagree on many things, we both agree that we're NOT about to bet against oil.

So come 2007, you can expect to see a new series of oil-related winners propping up in the WOW portfolio.