Energy Investing: What to own at $63 a barrel
By Adam Lass
In this article
In the Far East, North Korea wants several million dollars to come back to the six-party bargaining table.
Front-month oil futures were up for the fourth day in a row and were hovering around $62.76/barrel.
Oil companies always look good, but not necessarily all oil companies.
Energy Investing: What to own at $63 a barrel
It's Monday and the trends are… jumbled at best. In the Middle East, the Iranians have seized British marines in what may or may not be Iraqi territorial waters, depending on whose map you are looking at. Tony Blair is outraged, and promises to do something about it (although no one's really sure what).
In the Far East, North Korea wants several million dollars to come back to the six-party bargaining table. It notes that it's its money that the United States has frozen, and at a minimum, wants it transferred to Chinese banks. The Chinese, on the other hand, point out that the money may be the illicit gains of a DPRK currency-counterfeiting scheme and are less than sanguine about accepting it.
And just when you think there is a trend building up here, the head of Ireland's Protestant majority Democratic Unionist Party, Ian Paisley, and Catholic minority party Sinn Fein's Gerry Adams, sat down in a room together face to face for the first time ever and agreed to a collaborative government.
Energy Investing: Prices are high and going higher
The gods of war are all confused now, and we all know that the markets hate confusion. Oil speculators, on the other hand, are not confused at all, and the price of the stuff that greases the world's wheels is up, up, up. Last I looked, front-month futures were up for the fourth day in a row and were hovering around $62.76/barrel.
Funny that the reason given for today's rise was the aforementioned border Iranian skirmish, seeing as how the climb has been going on for days. Ah, well, in confused times, the horse often finds itself chasing the cart, as it were.
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So what is worth owning during such interesting times? Well oil companies always look good, but not necessarily all oil companies.
Energy Investing: What to own and what to buy
Skimming through the top six in the Energy Select SPDR (XLE:AMEX), I note that Exxon Mobil (XOM:NYSE) is facing extremely strong resistance at $76. Chevron (CVX:NYSE) is also facing resistance at the current price, but looks far more likely to beat same and rise higher. Conoco Phillips (COP:NYSE) has broken through the top of that trading range, but looks like it used up all its strength to do it, and will probably lollygag a bit now.
Schlumberger (SLB:NYSE) has gone so far as to set a new 2007 high. But wait: that was last Thursday, long before the recent fracas, and may even be priced a bit beyond events and oil prices right now. I could be wrong here, mind you, as it does seem extraordinarily well placed to profit from all this brouhaha, but chart-wise, it really ought to come down about $2 before rolling any further.
Occidental (OXY:NYSE) looks to be stalled in much the same fashion as XOM. And finally there is Valero (VLO:NYSE), which is simply going up, setting new 2007 highs day after day with technical resistance still another $4 higher than current levels.
It seems to me to be a bit of a conundrum: oil is certainly what you want to have already bought, but I am not rightly sure that you would care to buy any of this sextet other than CVX and VLO at current prices.
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Adam Lass is the founder and manager of the WaveStrength Group, and is a contributing editor for Taipan Financial News. As the creator of WaveStrength's proprietary analysis system, Adam's expertise has shaped a franchise of successful investment newsletters and services, including WaveStrength Options Weekly and WaveStrength Apex.
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Related Resources
Speaking of cabbages: Bank Poses Obstacle in North Korea Nuclear Talks. - The New York Times
Speaking of Kings: Northern Ireland parties seal power-sharing deal. - Reuters and AlterNet