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Post-Election Trading Made Simple

Over the past two months shares of gold (NYSE:GLD) and Apple (NASD:AAPL) have had a sizable bite taken out of their share price. Active traders along with the longer term investors have had a wild ride this fall watching these investments slide to multi month lows. The big question is when will gold and apple shares bounce?

Here we are again with another election behind us and Barack Obama in the White House again. Many think this means four years of the same thing… Printing, Inflation and higher stock prices.

Is this good or bad for Americans or the world for that matter? I doubt it, but who really knows and who cares because there is nothing anyone can do about it now. So buckle up your seat belt and focus on trading and investing with major trend both within the United States and abroad using exchange traded funds.

Currently the broad stock market and commodities are in a full blown bull market so the focus should be to buy the dips until proven wrong. Below are some charts showing the important breakout levels for Apple, metals, oil and key indexes like the Russell 2000.

Be aware that during pullbacks which last more than a month which is the market has done, some of the biggest drops in price happen just before prices bottom… Scaling into positions is the key to minimal draw downs.

 

Apple Inc. – AAPL Stock Chart:

Shares of Apple clearly show the down channel which must be broken before investors start buying again. This stock seems to have big potential for $650 to be reached quickly. If Apple shares rise so will the overall stock market… Follow my live charts free here: http://stockcharts.com/public/1992897

AAPL - Apple Shares

 

Gold Spot – GLD Exchange Traded Fund:

During August and September investors flooded the gold market in anticipation of QE3. Since then gold has been drifting lower with profit taking and because of some slowly strengthening economic numbers in the USA. Gold looks ready for a run to the $1800 but may stabilize here for a few weeks first.

Gold Breakout

 

Silver Spot – SLV Exchange Traded Fund:

The price of silver moves similar to that of its big yellow sister (Gold). While the charts look the same silver is highly volatile and can super charge your portfolio when metals rally.

 

Crude Oil Spot – USO Fund:

Crude oil has been correcting for a couple months also and still has a lot of work to do before a new uptrend to be triggered. Currently oil is trading in the middle of is trading range but once the price breaks above $93 per barrel a good investment fund would be USO.

Oil Breakout

 

Russell 2000 Small Cap Index – IWM

Small cap stocks typically lead the broad market in both directions. They are the first to rally and the first to rollover and sell off. The major indexes like the DOW, SP500 and NYSE have not formed clean chart patterns which is why my focus is on the Russell 2000. Small cap stocks are now showing a rising relative strength compared to the SP500 large cap stocks and this is very bullish for stocks in general. The best way to trade this index is through the exchange traded funds IWM and TNA.

Rut Breakout

 

Post-Election Trading Breakout Summary:

In short, history shows that equities tend to rally after an election. For a detailed outlook of how to trade stocks and indexes during the election cycles be sure to read my report “The Election Cycle – What to Expect in Stocks & Bond Prices

Chris Vermeulen
www.TheGoldAndOilGuy.com
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WTI Crude Oil & Oil Stocks Seasonality & Year-End Outlook

By: Chris Vermeulen – www.TheGoldAndOilGuy.com

Crude oil has had some large price swings this year and another one may be on its way. This report shows the seasonality of crude oil along with where oil is trading and what the oil service stocks are telling us is likely to happen going into year end.

Since WTI Crude Oil topped out in September at the $100 resistance level (Century Number) many traders are looking for a bounce or bottom to form in the next week. Historical charts show that on average the price of oil falls during November and the first half of December.

The charts of oil and oil stocks shown below have formed patterns on both time frames (weekly & daily) that lower prices are to be expected. If you did not read my Gold Seasonality Report I just posted be sure to review it here: Gold Seasonal Report

Crude Seasonality

WTI Crude Oil Weekly Chart:

Here you can see that price tends to fall going into Christmas and rallies during the last week of trading. This price action falls in line with Dimitri Specks seasonal chart providing us with insight as to what we should expect. Later this week I will finish my report on the Election Cycle Seasonality report which shows weakness in the market during Oct & Nov when a president is up for re-election.

Crude Oil Price

Oil Services Stocks – Weekly Chart:

If you follow oil closely then you know likely know already that oil related stocks can lead the price of oil by a couple weeks. What this means is that if big money is flowing into oil stocks (bullish price patterns with strong volume), then you should expect the price of crude oil to rise in the coming days. That said, if money is flowing OUT of oils stocks then lower or sideways oil price should be expected.

The weekly chart oil stocks show a very large bearish head & shoulders pattern. While I do not think the neckline will be broken it is very possible.

One of the most important pieces of data on the chart is the VOLUME. Notice the lack of it… Volume tells us how much interest and power is behind chart patterns and declining volume clearly tells us these investments are out of favor currently and that big money is not moving into them.

Oil Stocks Weekly

Oil Services Stocks – DAILY Chart:

Zooming into the daily chart of the oil service stocks we can see there is yet another bearish pattern unfolding. Another head & shoulders pattern which looks as though it is just starting to breakdown as of this writing. Next support level is $35-36.

Crude Oil Stocks Daily

WTI Crude Oil and Oil Service Stocks Trading Conclusion:

Looking forward 1-2 months (November – December) taking the seasonal price swings in oil, re-election cycle seasonality and price action of oil stocks I feel oil will trade sideways or down from here. With that being said, expect crude oil to rally during the last week of the year. I hope this provides some useful info for your trading!

Get my Daily Trading Analysis & Trade Setups at: www.TheGoldAndOilGuy.com

 

 Chris Vermeulen Chris Vermeulen is Founder of the popular trading analysis website www.TheGoldAndOilGuy.com. There he shares his highly successful, low-risk trade ideas. Since 2001 Chris has been a leader in teaching others to skillfully trade Currencies, Stock Indices, Bonds, Metals, Energies, Commodities, and Exchange Traded Funds. Reach Chris at: Chris[at]TheTechnicalTraders.com

 

Disclaimer:
This material should not be considered investment advice. Technical Traders Ltd. and its staff are not a registered investment advisors. Under no circumstances should any content from this website, articles, videos, seminars or emails from Technical Traders Ltd. or its affiliates be used or interpreted as a recommendation to buy or sell any type of security or commodity contract.
Our advice is not tailored to the needs of any subscriber so go talk with your investment advisor before making trading decisions This information is for educational purposes only.

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Market Meltdowns, Inflation, Protecting Capital & Trading Commodities

The purpose in owning commodities like gold, silver and oil is to protect oneself from the effect of inflation that I believe will begin to assert itself in the coming months.

Unfortunately, the United States has taken a monetary policy of printing massive amounts of money to attempt an escape of deflation. In just the past 16 months, the monetary base has ballooned from $908 billion to $2.0 trillion. Bailout funds in the past 2 years total $8.1 trillion….. That is 78 times more than what they spent to bail out WorldCom…… and 123 times more than they spent on Enron. U.S. debt has risen sharply, from $6.2 trillion in 2002 to $12.1 trillion today. These are scary numbers!

The illusion of economic recovery in the U.S. is simply the function of the FED making billions and trillions of newly printed money available at literally ZERO percent interest to the largest financial institutions. The idea that you really can get something for nothing is fantasy. But that’s what’s happening – Money created out of thin air, instead of created by PRODUCTION.

A painful reality check will appear when these quantitative easing policies create inflation without employment or productivity gains. Commodities – hard assets – will outperform everything in this type of environment. To some people commodity investments may sound like a no-brainer investment, however without a sound money and risk management system in place there really is no such investment.

This is why I focus on technical analysis as it provides price points for investments when we should be putting our money to work on a weekly or monthly basis. When volatility is rising I put less money to work to protect my portfolio from sharp price movements (risk). And during low volatility I push more money into the market catching trends with lowered risks.

What really blows my mind is how almost everyone I know who employed a broker or financial advisor lost between 30-70% of their portfolios during the market crash. What the heck was everyone paying for?

What I am trying to say is everyone can make money in a bull market. The question is, do either you or your financial advisor know when to take some profits to lower overall risk? How much money will you give back when the market corrects, starts another bear market or is affected by a terrorist attack? Do you have protective stops in place?

Ok, that’s enough of that; let’s get to the charts…

Gold Futures Trading – Hour Chart
The gold futures chart allows for us to trade prices around the clock 23 hours a day. A lot of important price patterns are analyzed from the over night trading hours which helps to provide low risk and high probability setups for the GLD gold fund.

This hour chart shows about 3 times more trading data on gold than the GLD etf. Using this data we know if gold will be gapping higher or lower the next day and if the price is trading near a support or resistance level, etc… I focus on selling short gold at resistance levels in a down trend and buying dips during up trends.

The futures trading volume is very interesting to look at. The selling volume was more than twice what we are seeing for this bounce/rally. A low volume rally/bounce is not exactly what we want to see for a move higher. I have my doubts about this being THE NEXT LEG HIGHER, but let’s watch it unfold.

Gold futures Trading Signals

Gold futures Trading Signals

GLD Gold ETF Trading – Daily Chart
Trading just the US market sessions does limit the trading opportunities. When commodity etf’s open each day they tend to gap up or down as the overnight trading move the price. To most traders GLD is an ugly looking chart because of its tendency to gap up and down each day. But when you focus on the gold futures charts for trend and price pattern analysis things become very clear.

Gold is moving higher currently and I am waiting for a low risk entry point before jumping on board. I don’t chase prices higher unless there is a lot of excitement in the air with lots of momentum to back up the higher risk play and, I do not feel this is a time to panic and buy gold.

GLD Gold ETF Trading

GLD Gold ETF Trading

SLV Silver Exchange Trade Fund – Daily Chart
Silver has had a nice pop and I thing it will out perform gold when the time comes. But this upward slanted mega phone pattern is not what I like to trade. While it is still bullish, it’s close to a neutral pattern and breakdowns from this can be fast and painful if you do not have a protective stop in place.

It’s looking a little long in the teeth for this bounce so I am waiting to see what happens over the next few days.

Silver SLV ETF

Silver SLV ETF


Crude Oil USO Fund – Daily Chart

Oil has had a great bounce off of a major support level back in December. Oil is now testing its October highs. It will take a few weeks for a new setup to form in oil as buying here carries about 15% downside risk.

Oil Trading Signals

Oil Trading Signals

Natural Gas UNG Fund – Daily Chart
Last weekend I got together with my buddy who is a futures broker in Toronto. We spent a bunch of time going over some charts, swapping thoughts, ideas strategies etc…

Anyways he said a ton of people are opening futures accounts and wanting to trade natural gas. He said that is a suicidal thing to do and that almost everyone who opens an account to trade natural gas loses all their money within 3 months. Natural gas is one commodity you need to have a solid trading strategy along with strict risk and money management.

Natural gas on the UNG chart looks like a possible short play. But let’s wait and see how things unfold this week.

Natural Gas Trading

Natural Gas Trading

Gold, Silver, Oil & Nat Gas Trading Conclusion:
Trading and investing with technical analysis allows us to assess the current market volatility and trends. Understanding these things will help protect your hard earned money.

It looks like 2010 will be a fantastic year for trading!

Get my Trading Reports, Analysis and My Trades:
www.TheGoldAndOilGuy.com

Chris Vermeulen

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Gold, Silver, Oil & Nat Gas Going Wild!

Nov 4th, 2009
Precious Metals ETF have gone wild the past 2 weeks. Last week we saw gold and silver prices drop sharply as it shook out short term trader’s stop orders before breaking out and moving higher. Also there is a disconnect between the gold and the dollar.

Energy commodities like natural gas and crude oil are moving in opposite directions and look to be picking up speed. Natural gas is losing pressure and oil is on fire.

GLD ETF Trading – Pivot Trading Low
Last week we had our pivot trading low generate another buy signal for gold. Trading pivot lows is a simple trading strategy. I call them low risk setups and take advantage of buying a stock, commodity or currency after a pullback to support and when a reversal candle is formed. This chart clearly shows when you are trading with the trend buying on the dips is generally a low risk play with great up side potential.

Gold Bull Market Pivot Trading Low

Gold Bull Market Pivot Trading Low

Precious Metals ETF Trading – Gold Bullion Takes Control
This is a chart which shows the performance of gold stocks (red), silver bullion (blue) and gold bullion (green). As you can see the past 2 weeks while the market has been selling down precious metals stocks have been hit harder than silver and gold.

Because of the heavy selling in stocks recently the smart money had been going into commodities especially gold bullion. Gold stocks are a great play but this is telling us investors feel safer in physical bullion than stocks.

Gold is the most known precious metal and safe haven which is why it’s holding value better than silver and stocks. This week we are seeing gold become more valuable in several major currencies which means gold is actually making a real move higher.

Gold Bullion, Silver Bullion, Precious Metal Stocks

Gold Bullion, Silver Bullion, Precious Metal Stocks

USO ETF Trading – Breakout & Bull Flag
Crude oil has had some great breakouts this year and it looks like we are about to get another buy signal shortly. We had a breakout in Oct from the large pennant and are now flagging which is very bullish. We could see USO reach $50 in the next month or two.

Crude Oil Bull Market Breakout

Crude Oil Bull Market Breakout

UNG ETF Trading – Pivot Low or Waterfall Sell Off?
Natural gas is at a crucial level for a higher low bounce or another massive panic sell off. Trading right now with UNG is a 50/50 shot so we will just have to wait and let things unfold more before taking any action.

Natural Gas Pivot Low Bear Market

Natural Gas Pivot Low Bear Market


The Stock Markets, Precious Metals & Energy Trading Conclusion:

The market is starting to feel a little squirmy as it tries to find support. Small cap stocks continue to get crushed while blue chip (large cap) stocks are holding more of their value. Gold has broken higher this week while silver and precious metal stocks under perform their big sister Yellow Gold.

Crude oil is holding up nicely forming a 3 week bull flag and showing signs of life while natural gas continues to get hammered.

The market has been jumpy the past 2 weeks because market participants are very uneasy about the future direction of the US dollar.

If you would like to receive these free trading reports join my free list:

Chris Vermeulen

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Mid Week Gold, Silver, Oil and Nat Gas Trading Report

Commodities so far this week have not changed much. But I can point out a few things for us to watch Thursday and Friday.

Precious Metals – Gold GLD fund – Silver SLV Fund – PM Stocks GDX Fund
We could start to see a shift between the price relationship between gold and the broad market. I pointed this out last week mentioning that gold and silver are starting to hold up in value while stocks sell off on big days. For example, Wednesday’s sell-off in equities did not have much effect on precious metals. This is what we want to see. It means money is moving out of stocks and into gold and silver bullion as a safe haven.

These three charts of GLD, SLV and GDX show Wednesday’s price action as gold and silver moved higher while precious metal stocks sold down with the rest of the market. This is generally a bearish indicator for gold and silver but because I am starting to see this happen more often and traders are ready for the market to top any day, I am seeing this as a bullish indicator. If the market starts to slide I have a feeling investors will be dumping a lot more money into gold and silver.

Gold, Silver, Precious Metals Stocks

Gold, Silver, Precious Metals Stocks

Energy – Oil USO Fund – Energy Stocks XLE Fund
We are seeing a similar pattern in the energy sector. Oil had a nice move higher today while energy stocks sold off. Stocks are starting to fall out of favor.

Energy Oil Stocks

Energy Oil Stocks

Natural Gas – UNG Fund
Natural gas is still in a bear market and trading under a major resistance trend line. This commodity could go either way so I am going to wait for the odds to be more on my side before jumping on board with a long or a short trade.

Natural Gas UNG Fund

Natural Gas UNG Fund

Mid-Week Gold, Silver, Oil and Nat Gas Conclusion:
The market is starting to look and feel top heavy with many indicators and price action patterns giving cross signals. While the market could continue to rocket higher with new money getting dumped in from average investors because of solid 3rd quarter earnings, we must be cautious by tightening our stops and take some profits off the table. Until we get a short term oversold market condition I am trading very conservatively.

Waiting for a good trade is crucial in trading. If you always want to trade and force positions when the market is choppy you end up with lower probability trades.

To receive my free trading reports, please visit my website: www.GoldAndOilGuy.com

Chris

The Price of Oil

How did it get here, and where is it going?

By Marin Katusa, Senior Editor, Casey Energy Opportunities

What a difference a year makes.

While March lions and April showers were at work in 2008, so were these factors in the U.S. and global economies:

 The Dow Jones Industrial Average remained steady above 12,000.

 The leading indicator of existing home sales was down over 21% from the previous year, and the official unemployment rate was just beginning its upward creep by crossing the 5% mark.

 The first official admissions of the “R” word. In early April 2008, the International Monetary Fund (IMF) declared a 25% chance of a global recession, and Federal Reserve Chairman Ben Bernanke told Congress that gross domestic product “could even contract slightly.”

 The novelty of bailouts began. Bernanke also assured Congress that the Fed’s emergency authorization of a loan against $29 billion of Bear Stearns assets wasn’t putting taxpayer money at risk: “I feel reasonably confident that we’ll be able to recover all the principal and indeed some interest, and there is some chance of even upside beyond that.”

 The dollar’s six-year slide against the euro, hitting its lowest ever at $1.60 in late April. It also fell below the 7-yuan mark in China for the first time.

 And oil, comfortably above $100/barrel, was heading for its summer crest of $147.

A scant 12 months later, the Dow is trying to stagger back from a plunge to 6,500. Home sales are hinting a possible turnaround, unemployment (even the official, conservative figures) is expected to reach double digits before long, “recession” and “bailout” are household words (often accompanied by four-letter ones), the dollar is recovering… and a barrel of oil is worth half that hundred dollars. Hardly worth pulling out of the ground.

What happened? And even more important for us as investors, what’s going to happen?

The Casey Energy Opportunities team pulled together the pieces of the oil sector picture that other sources tend to scatter or ignore. We’ll give you a broader understanding of the drivers within the oil industry, the markets in which they operate, and how you can use that knowledge to push your profits upward.

The Oil Industry Now: A Rock, a Hard Place, and a Supply Glut That Isn’t

Everyone who drives a car or heats a home with petroleum has welcomed the fall in oil prices from their high in the summer of 2008.

While it’s hard to argue that filling your tank at $2 per gallon is a lot easier on the wallet than $4 or $5 per gallon, the broader economic effects of such low oil prices are troubling.

Leading the concerns is the drop in oil exploration and drilling that accompany a drop in price. Below the $50/barrel mark – and for many companies the bar is closer to $65 even for conventional fields – oil producers typically spend more money getting oil out of the ground than they can recoup by selling it. At the same time, turbulent financial markets have tightened credit. These two factors have pressured producers to allocate exploration budgets away from drilling projects and toward meeting debt obligations and day-to-day operating costs instead.

The plunge in prices has consumed the cash buffers of even the major oil companies. ConocoPhillips, for example, announced in January that along with eliminating 1,300 jobs and writing down $34 billion in assets, it was also planning to cut its 2009 investment budget by 18%. Exploration projects are part of both writedowns and spending cuts. The results of curtailed exploration are two-fold. First, some oil companies will be simply unable to survive the economic crisis. Second, supply in the longer term is being sacrificed to stay afloat now.

Storage facilities are bulging. The chart below shows the contents of the Cushing, OK, storage facility — where NYMEX deliveries take place — have recently doubled from their average 2008 volume. Along with a host of other facilities around the world, it got this way because of an unusually dramatic contango at the beginning of 2009. (A contango is a kind of market inversion, when the current [spot] price dips lower than the future price.)

In January, the spot price of oil plummeted as low as $37/barrel, while futures for July delivery were trading for $52. That meant if an oil company could buy and store product for seven months, it could lay out $37/barrel and be guaranteed a profit of $15 – or 40%, minus costs – in July. And indeed the buying frenzy took off, reinforcing the decision to turn off the drills.

So for the moment, we are artificially flush with oil, and demand has dropped as the global economy will likely shrink for the first time since World War II. It’s no surprise that oil prices have been staying down.

Many analysts say we won’t feel the effects of declining exploration for a few years. But the numbers are emerging already. According to the U.S. Energy Information Administration (EIA), non-OPEC countries demonstrated an average annual growth in supply of 570,000 barrels/day from 2000 through 2007. In contrast, they recorded a drop last year of some 300,000 barrels/day.

At the same time, OPEC appears to be conforming to its production cuts of 4.2 million barrels/day, begun in September 2008. The oil cartel is known to announce cuts that its members don’t actually follow; it’s in their economic best interest, if only in the short term, to sell all they can. But this time, oil has plunged far below levels to sustain their economies. Even Saudi Arabia expects to run a budget deficit this year.

OPEC, which produces about 40% of the world’s oil, would like to see prices around $75/barrel, at least. But the fragile global economy would have a difficult time absorbing such a price at the moment, and the cartel decided against further production cuts when it met in March. In fact, some three weeks later, Saudi Arabia actually announced a price cut on all its grades of crude to European, North American, and Mediterranean markets – a dramatic attempt to spur demand amidst high inventories.

So, entwined as it is with the economy, the oil industry is currently in a conundrum. The fix it requires – higher prices for its product – will choke the framework in which it operates.

At the same time, we’ve got supply problems ahead.

How Did We Get Here Anyway?

Like many aspects of the markets, movements in price are driven partly by real factors and partly by perception. Rags-to-riches-to-rags-to-riches Texas oilwoman Sue Sanders summed it up when she noted wryly in her 1940 autobiography that “nothing succeeds like reports of success.”

Last year’s run-up of oil was no exception: part real, part report. Some of the real factors:

 The weak U.S. dollar. The United States is not the only country that buys oil in U.S. dollars. The price per barrel is pegged to it, in fact. When the dollar is weak, the cost of U.S. exports drops; and indeed by December 2008, the U.S. trade deficit had fallen to its lowest in nearly six years ($39.9 billion, according to U.S. Commerce Department data). However, a weak dollar means it takes more dollars to buy a barrel of oil. Global concerns over the strength of the U.S. economy, including America’s ever-rising level of debt, had undermined the dollar to the point that OPEC members began to murmur about dumping it for the euro or a basket of currencies.

 Geopolitical turbulence in oil-producing countries. The Iraq war, oil-related militancy in Nigeria, and Iran-Israel-U.S. posturing over nuclear issues were hotspots in the first half of 2008. The average nightly news covered casualties in Iraq, but industry watchers tracked attacks on pipelines and oil facilities. Likewise, in Nigeria, sabotage and oil worker kidnappings by militant groups such as the Movement for the Emancipation of the Niger Delta (MEND) regularly shut down facilities to repair, negotiate, or improve security. And as spring warmed up, so did the war of words between Iran and Israel. By early July, Iran had gone so far to indicate it would move against shipping in the Persian Gulf if attacked. The United States would have moved next, of course… thus driving up the price of oil in the jittery oil markets, which depend on Persian Gulf shipping lanes.

 Unusually low crude and gasoline supplies entering the 2008 summer driving season. In early April, the EIA reported significant drops in supply – gasoline declined by 4.53 million barrels and crude oil by 3.2 million barrels, a one-two blow that surprised and worried industry watchers. Behind the gasoline slump were lower refinery margins, called crack spreads. In mid-March, when refineries would normally be coming off their maintenance schedules to churn out gasoline for summer driving, the margin for turning a barrel of crude into gasoline was negative for the first time in three years. Refineries sought profits in other oil products, and the markets responded to the expected imbalance in supply and demand.

 High demand. China is a stand-out here, and for more than its usual energy appetite. China has a penchant for aiming to break records – from its goals in five-year plans and building projects to its haul of Olympic medals – and in the first half of 2008, it was visited by some dramatic examples: a great earthquake and major snowstorms, events that disrupted the country’s energy industry. Combine that with the fact that China was also preparing for the Beijing Olympics in August, and it’s easy to understand why it was buying oil very heavily until mid-summer.

On the perception side of price drivers, it’s hard to overlook the fact that the market push stayed strong in the face of increasingly gloomy economic data. Casey Research was earlier than most in predicting the economic crash (we published reports such as “The Coming Currency Crisis” in June 2006), but by spring 2008, even officialdom was dancing around the word recession.

Normally, news of burgeoning foreclosures, plummeting home sales, spiking personal and business bankruptcies, rising unemployment, and other economic indicators would tend to exert a bearish influence. After all, consumers generate 70% of U.S. economic activity, and if they stop or cut back on driving to work or the shopping mall, telephone relatives or business partners instead of flying out to see them, reduce purchases of items containing plastics, turn down the thermostat, and other weather-the-storm measures, oil consumption should decline.

It took months for all these drivers to realign – but as we all know, they did, and then some. The chicken-and-egg debate, whether oil’s sky shot triggered or portended the economic debacle in the closing months of 2008, will require more distance and data to resolve. But it’s true that the dollar had started its comeback by mid-summer, supply had caught up, geopolitics had settled a bit, China backed off on its buying, no major hurricanes hit – but economic realities did.

Meanwhile, Congress jumped up and down and cried “Speculators!” “OPEC!” “Oil producers!” in tidy sound bites.

The Next Big Plays: Where You Need to Be

Oil companies are influenced by the range of market drivers and economic conditions according to size. The junior oil producers, those with market capitalizations of $250 million or less, have the small-business advantage of flexibility when times are good. These times aren’t good, of course, and even well-managed juniors with good projects are in trouble. Their vulnerability is in the credit market. You’ve likely heard of credit lines being revoked and refinancings denied to people with impeccable credit. Now imagine pitching a drill project without a wallet full of assets ready to lay on the table.

Mid-tier producers, with market caps between $250 million to $2 billion, will look to mergers and acquisitions to survive. The majors ($2-20 billion market cap) and Big Oil (over $20 billion) will also be shopping. With low oil prices shutting down exploration, development, and even production, these companies will be looking to replace their reserves instead by purchasing smaller, solid companies with proven production. It’s simply cheaper.

We see two ways to profit from this trend.

First, we buy shares in undervalued, producing companies that are profitable even below $40/barrel, are best of peer, and own large reserves. These are the companies that Big Oil will be looking to acquire. One such company, an oil sands producer, is currently a part of the Casey Energy Opportunities portfolio.

Second, we believe that owning a potential consolidator is the best position. As debt load and low commodity prices overtake them, junior producers will be forced to consolidate their projects. We currently own one such candidate, and are scouting for others with such muscle. Consolidators will be purchasing projects from the bank at 25 to 30 cents on the dollar.

Our tactics have already paid off handsomely in the last six months: all our recent recommendations have been on fire. A few tripled their value, and one generated a return of 540%.

As we’ve seen, supply problems are looming, no matter what timetable of Peak Oil you may believe in. With increased demand inevitably come higher prices. Our approach at Casey Energy Opportunities positions us to take advantage of the trend in both the short and longer term. And we guide our subscribers not only when to buy or sell, but also when to take profits and a “Casey Free Ride” to eliminate risk.

We’d like to offer you the opportunity to kick the tires of Casey Energy Opportunities RISK-FREE for 90 days, with 100% money-back guarantee. Click here to give it a try.