If there is one thing that history teaches us (other than that we don’t learn from history) it is that following a drop as severe and rapid as this in the stock market and commodity prices, there will be some incredible opportunities once things start to recover. The energy sector has been one of the hardest-hit areas of the stock market, so it is likely that some of the biggest opportunities will be there. That doesn’t mean, however, that investors should look to rush in and buy energy stocks indiscriminately.
I know that after a strong three-day rally FOMO will be running high, but patience and selectivity are essential at times like these, and right now is not a good time to buy.
For one thing, crude looks to be revving up for another test of the double low just above $20 that formed over the last couple of weeks. That may or may not hold but buying energy stocks just before we find out that important piece of information makes no sense at all. If it does hold, there will still be plenty of upside left after that is known, if it doesn’t there will be much better entry points before long.
In addition, if we look at the S&P 500 from an Elliott Wave perspective, things there look pretty bad right now.
The pattern so far has a classic Elliott look. A first wave was followed by a fifty percent retracement, then a bigger wave, also followed by a fifty percent retracement. In theory, that means that the fifth wave, the…