MigraineCall wrote: If I was forced to give a simple answer to that, I would say no. The trigger is a sustained move to the upside with volume after a bottom. Wait for the turn.
If I was going to enter a new position with my Mom's money, I woud also say not yet. Oil and oil stocks are in a current downtrend, still caught up in a liquidation sale along with negative general market sentiment.
That said, I maintain some heavy core positions myself, with the dividends now nearly covering the increased margin interest I pay, while the share price moves up and down. Oil is at levels that should offer support for a number of reasons, but that may not be enough.
As Experienced reminds us, and I lived through some as well, history has shown us that in this current environment there is a good chance of a major spike down with a general market selloff due to a negative event or disintigrating sentiment. This is reinforced with the backdrop and gloom of an impending recession and economic fear, the likes of which have not even begun to hit us yet as the Fed signals they will continue to turn the screws and cool the economy further to fight inflation.
There could well be a bloodbath coming that doesn't make logical sense, where everything of value gets sold off at once including oil stocks into a market with no buyers. It is like elephants through a keyhole. Sellers must sell out to cover margins. Carnage, then capitulation.
Many retail investors now in the market have never seen or lived through one. Many are hanging out on boards like these posting nothing but hopes and over exuberance without a sense of fiscal mortality. True, I am bullish, long term, but I clearly recognize the difference, and understand the consequences of stepping into speeding traffic, fighting a trend with momentum headed in the opposite way.
Most others and market movers are playing it safe, and staying on the sidelines waiting for the turn. That means possibly missing out on a huge V shaped bounce and a few percentage points, but they enter in an uptrend and avoid the risk of a grinding drop. With luck, the pop won't result in a dead cat bounce.
Historical market drops of major market pullbacks mostly start off with a top, and a slow bleed, like a tire losing air on the highway before the rubber finally shreds off the rim and you slide into the ditch. We are in the slow bleed phase, and VIX volaltility is absurdly low, not a good sign IMHO, and it certainly looks ripe for a set up for a fall.
For the oil market to turn, we need to get through this speedbump of low pricing and this market selloff. We do not know whether or not we will see a full scale carnage and capitulation before it turns, like the pandemic did to us before we see the bottom. That event would likely create a sharp V snap back spike with all the short positions held that must cover. As there was low liquidity on the way down, one can expect low liquidity on the way up.
It could also wallow along the bottom until conditions gradually improve, or at least economic conditions stop getting worse if we get a drawn out soft landing. We may be in for low prices for a few months.
The flipside to all this, is all the increasingly bullish fundamentals that we know are looming and just around the corner. The energy crisis we are facing in our lifetime will be epic, and conditions are continuously building for a bigger spike as time goes on. Capital investment in oil is far too low, and current prices along with poor policy does not help as we near the marginal costs of production. For them to replace reserves now is a lot more expensive than before, and will be even more costly going forward. Restraint is the new norm, creating a weakened industry unable to respond to any spike in demand, a recipe for a massive rerating in beaten down oil producers, magnifying the scale of the spike.
Realize that cheap oil and products stimulate oil demand. This is seen directly in inventory data each week.
Cheap fuel and oil also acts to lower inflation. The lag is in some cases long. Think of the long cycle of manufacturing, shipping, rail, trucking. It is seen only after the delayed inflation and CPI data is released months later. So this means today's cheaper gas and diesel will start to be seen in the market data around 2023 Q1 and beyond. This is one reason why the Fed got so far behind the curve. If it sees this new lower oil cost input as a leading indicator, it may signal to go more dovish than planned backing off on interest rates increases a bit, and the market may bounce.
We are at all times just a news tweet away from events that rattle the oil markets and cause a stampede in the rush to cover shorts. That is why for me, I still am holding core positions, although I am adjusting to maintain a trading cushion and buffer.
One strategy you can use is to slowly add positions as it drops, phasing in gradually at different prices, giving you the benefit of averaging your cost base over the pullbacks. There are also others out there with bigger bang for your buck on an oil upside to consider. They have had much further drops than SU has, as SU is such a stable stock to hold.
I think now is the time you should zoom out on your charts, looking at longer term share prices and judge each stock on a historical and potential basis for those on your shopping list.
Don't expect to get a Santa Claus rally this year. However with electricity prices nearing 400 Euro per MWH in Europe, the lump of coal we just got is not so bad of a gift after all for some people.
thumble wrote: Great post thank you.
In your opinion, is now the time to buy Suncor ? If not what's the trigger ?