Forward to friendThree Critical Sector Moves
By
by Bryan Bottarelli
Three critical sector moves happened today -- and each one could have an impact on your investment decisions.
First off, crude-oil futures continued to fall this morning -- dipping under $51 a barrel. This puts oil prices close to 20-month lows, good for a full 17% decline since the start of the 2007 calendar year.
Today’s dip is being credited to Saudi Oil Minister Ali al-Naimi -- who said there is no need for OPEC to cut production.
Now here’s the thing: If you trust anything that OPEC says, then shame on you.
The cartel is notorious for making statements that are not carried out (and even if they are carried out, there is no way to prove it, thus making the situation even more ambiguous). As a result, never base any investing decisions on OPEC news announcements. Rather, use the prevailing market trends to dictate your actions. As the trading day has progressed, oil prices reversed -- and actually traded higher by over $1.
That’s why I feel the time is right to buy longer-dated call options on the oil sector. WS Traders, keep an eye out for this play -- coming soon!
The second critical sector move today came in the form of homebuilder stocks -- fueled by this morning’s news from Lennar (LEN:NYSE).
The stock gained over $2 (a 4% pop) after saying that 2007 will meet -- or even exceed -- its 2006 earnings of $3.69 per share. This was a very important confidence booster for the entire homebuilding sector -- as it points to a turnaround scenario starting this year.
On the news, the entire homebuilding sector experienced strong gains, as Toll Brothers (TOL:NYSE), DR Horton (DHI:NYSE), and Beazer Homes (BZH:NYSE) all moved to the upside.
As you know, Adam and I have been getting positioned in our WaveStrength Options Weekly service to profit off a 2007 housing recovery by playing a number of upside calls plays on the sector -- and today’s news was just what the doctor ordered. Stay tuned for further updates in our weekly WOW missives concerning exactly how to profit off the recovering housing sector.
And the third critical sector move came thanks to Intel (INTC:NASDAQ) who reported a 39% drop in profit in the fourth quarter. At the same time, it also forecasted flat gross margins in 2007, which is something no investor wants to hear.
On the news, Intel is off 5% and showing no signs of recovery -- which means we should stay away from chip names like AMD and Intel unless you have an abnormally large appetite for speculation and risk tolerance. To my eye, there are safer and more profitable ways to speculate and profit out there. Leave AMD and INTC alone, at least for now.