This week’s market action seemed to prove two very old trader’s axioms – ONE – the market will do precisely what will cause the most people the most pain and TWO – a trader should always look first to buy strength and sell weakness. Both of these axioms convince me that now is the time to load up on two oil companies: Noble Energy (NBL) and EOG Resources (EOG).
First, let’s take axiom number one: After dropping almost 800 Dow points immediately after the FOMC meeting, a rash of bad announcements followed on Chinese growth and our own GDP projections. Without the steady juice of Quantitative Easing ready to continue to take up the liquidity slack, most traders became convinced that this sell off was the beginning of another, more serious melt down and it was hardly likely to come storming back more than 500 Dow points. Were the majority of traders likely short at the bottom on Tuesday? You know that they were.
While there was volatility weakness in stocks, there’s been no weakness in oil and WTI prices are again threatening $100 a barrel – all while most of the other hard and soft commodities like copper, gold, iron and most of the grains continue to track near mid-term lows. Is there a more simple principle of trading than to always buy strength and sell weakness? If that’s right, now is a great time to be getting into oil stocks.
The two stocks…