Sunday, September 10, 2006

Oil Prices Still Under Pressure; Covering More Shorts

By now, you know that oil and gasoline prices have declined rather steeply. But what about the future?

In my August 14 post, I said to be prepared for crude oil futures to get down to about $65 a barrel, but eventually up to $100 a barrel. At this writing it's $65.82, so the biggest part of the decline may be over, for a while at least. I'm covering more shorts. This is why it's not such a good idea to do an all-or-nothing trade; if I had covered all shorts on August 21, instead of most shorts, I would have left money on the table.

I've also seen two articles recently (here and here) saying oil industry insiders are selling. This is obviously a bad sign. Because they've gone up so much in the last few years, oil company stocks could continue to languish even if oil prices stabilize and rise. I'm continuing to reduce my holdings, although eliminating them completely is not a good idea.

In the months ahead, what industry will do the best in the stock market? My sources say that high tech will take over the leadership from oil & energy -- and in fact that transition has already started.

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