Oil up, Oil stocks down: Consider a pairs tradeThe last few sessions have seen a brutal drop in Canadian oil stocks, while oil itself has increased and remained strong. OXY and DVN have taken a pounding but XOM and CVX are stable. The industry is not going anywhere, and is in the same shape as it was a couple weeks ago.
Run some chart comparisons to find which ones have been hit the most, having the largest divergences. These divergences tend to snap back.
SU is too strong.
The one I have my eye on is CNQ, vs WTI. A difference opened up of about 12%. CNQ has breached it's lower daily Bollinger band, which statistically only happens 5% of the time.
For a pairs trade, you can consider going long CNQ, and then short oil by buying HOD.
Can also be done easily with CNQ call options, and offset it with the leveraged inverse HOD fund.
Keep the quantities of each side the same magnitude so that the movements balance out, and take profits as they return to normal ratios.
Just a trade.