Newfield explores for and extracts oil and energy from the ground. It is closely correlated to the price and crude and given the sharp drop in the price of crude last week, it makes sense to me to buy it here near support. There is an ideal entry zone labeled on the chart.
Why did crude take such a tumble last week? Well, we can point to the heavy long position by the speculators and they may have decided to cut back their exposure.
I view crude oil as a safe buy here, especially when compared to the price of the overall stock market. WIth VIX under 14, and with options expiration for September now out of the way, I view the stock market as sideways at best.
Cheers.
Tim
Saturday 3:35PM EST, Sep 22 2012
Comments
timwest
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From Sept 22 @ 3:35PM EST - "I view the stock market as sideways at best". So far, on track.
pieromelendez
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yes, i completely agree with you time. i recall the parabola perfectly, every time i remember that specific parabola i can picture the cartoon digging that big gold rock on his backyard haha. i also belief the stock market has deviated from what its main purpose was but i cannot certainly say that it could have been better differently. But overall coming back to the nfx, the chart looks like is following your readings, am just very concerned about all the current news and sentiments that negativity brings to the table when expecting a reversal. i am thinking in jumping on this train at 32 and change just to feel more comfortable about it :). by the way, everyone seems to be talking about facebook. i saw what it looks like an inverse head and shoulders pattern, have you checked it yet ? it just went up 7 % on friday, and i always like to think someone knows something i dont know :)
pieromelendez
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do we still feel confident on the support ?
timwest
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I'm going to watch it closely. Keep an eye on crude oil for confirmation. It it is breaking down and the day's range is greater than yesterday, then hold off. When I lay out my plan ahead of time, it is like a driving plan or a road map, and yet I will still make sure the road conditions, such as weather and traffic, are safe before I put capital at risk. Thanks for asking.
timwest
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Also... take a peek at XLE versus OIL... you will see a huge divergence there that may be less risky than this trade and therefore more desirable. I always prefer a pairs trade over an outright trade in that way I don't have to worry about market risk as much.
Just to comment on the name of the chart... I'm always preaching to anyone who will listen that these commodity funds that are made to buy and store commodities above ground are a waste of your time in the long run. The proof is in the long run performance. Note how OIL drifts lower and is down 17% while XLE drifts higher and is up 32%... that is a 50% performance difference over just two years!!! And yet the correlations are there and the theoretical RISK parameters are the same, but magically, over time the OIL goes down. Why? For several reasons: Storage costs, slippage on futures contracts (aka - commissions and bid-ask spreads and liquidity and humans front running orders), expenses for lawyers, marketing. There is another reason which is Biblical and it reminds me of the parable of the talents: Wealth is not created by taking wealth and burying it in the ground (aka - "storing it"). Recall the parable? Over time, I will predict that OIL will slowly underperform XLE. There will be wide swings in this ratio, but over time OIL will lag XLE. I'll go into it more if anyone asks. But wealth is created by "creating a service for others" and the only wealth being created here is for the money management company and brokers and markets that are the beneficiaries of the capital under management.