Sometimes trading is easy, sometimes it’s not. But certain rules apply at all times: The trend is your friend. Get out of bad trades. When there’s nothing to do, do nothing. And today’s lesson: Go with what’s working.
In the oil market, we’ve had a period of relative quiet, at least as the oil price is concerned. We’ve been bouncing back and forth between $51 and $55 a barrel since the beginning of the year. Analysts have done little in the last two months besides guess where oil is headed next; one week they’re all convinced of a breakout, the next they’re sure that markets are ready to collapse.
One rule of thumb we’ve applied is to do nothing when there’s nothing to do – in the last weeks, we’ve refrained from messing around with our core energy picks of independent U.S. E+P’s working in the Permian basin. And now looking at the way oil stocks have reacted in the last month, we’ve seen again that those tried and true rules of investing are true for a reason.
Natural gas stocks have done nothing. Refining has been a disaster. Oil services have been drifting lower. Offshore stocks have continued to be bottom-of-the-barrel.
But our core players in the Permian continue to progress, if slowly. Even more, there have been opportunities to add to positions on recent dips that have proven profitable in core names like Cimarex (XEC), Centennial (CDEV) and other Permian stalwarts…