The daily horror show in oil continues and it's rattling the general markets again. The Dow is off 150 points and oil is sliding 2 percent in early trading. A very bad trading week for oil. What's the next stop? Could be 45. Yes, really.
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Oil is threatening to engulf the entire market due to the awe inspiring drop of 9% in one trading week. For two consecutive trading sessions - oil turned the market south. Yesterday, bad oil news led to a brutal sell-off. Today, more selling in oil put a huge dent in a massive relief rally - the Dow only ending up 63 after having been up well over 200 points. The bottom line here - the market can't continue to march higher if oil crumbles. The US is a producer nation now in oil and too many jobs will be threatened if this rout in commodities continues. Watch 60, which was breached - if the market can't reclaim 60 - watch out below.
I keep hearing from traders - we are at a bottom in oil and there is a value 'rush' to snap up energy names that have gone on sale. However, while the actual energy names have been getting snapped up - oil itself hasn't rallied, so I wouldn't rush to buy these names on that premise alone. That said - I do think COP is a buy below 65 for the dividend - so, if there is another draft down - get some.
It looks as if a wedge is forming in Apple stock. Which way will it break? The stock is well above it's 50 DMA so, it's quite likely to break to the upside if I was pushed to take a guess. However, I believe it would be healthier for the stock to break to the downside, flush out the weak hands while consolidating sideways to form the base for a new range. We shall see.
It took longer than I thought, but the ongoing collapse of oil prices is finally hitting stocks- today being the first time that a broad - based sell-off in stocks can be directly attributed to the crash in oil. So, a few questions - can oil stop crashing and what happens if it doesn't?
First, it depends on how risky your portfolio is at present. Do you have a lot of high 'beta' names - then you might be in for a bumpy short term road. If you own energy companies, you'll see some deep red in your portfolio as well. However, I do believe it's a long term buying opportunity. The world is still expanding in population and oil is a finite resource - so the price must go up in the long run. Stay with stocks if your time horizon is 10+ years - don't blink. McDonald's continues an epic 3 day sell-off - going from an intra-day high of 97.5 to 90.5 in three trading sessions - a really big move for a stock of this beta. Today the company announced that as of Monday it would eliminate certain menu items to improve speed in its stores, but the stock hasn't gotten a bounce from that news. What does MCD need to do?
This is the ugliest two day stretch for MCD in many a year - it's almost a 'flash crash' - moving 5 dollars in one trading session followed by today's downdraft. It looks ugly and puts the stock below both moving averages. The most recent sell-off was turned around, but the 200 DMA didn't hold - and it looks like this time - the sell-off is for real.
It looks like a double bottom is forming in COP - or it will fall off the table as they say. That blue line is falling and so is the stock - the price of oil taking a sledgehammer to this piece of the portfolio. If you want to know if this bottom will hold, all you need to see is if oil holds 60.
So, far - it's just a little profit taking. However, there seems to also be a rotation going on - I'll cover that with some of the other pieces of the portfolio. Does this sell-off have legs?
It's beginning to look like the big 'flash mini-crash' that happened a few sessions back is for real and there is profit-taking happening in Apple. This is of course a good thing - Apple went too high, too fast without any pause. It's simply healthier for the stock long-term to pull back to a more reasonable level -
So, the big question is - How far might the stock fall? Next is - when is it time to buy Apple again? First - Watch the 50 DMA at 108. If that fails, watch 102. I'd buy the stock below that number (102) - However, I'm not a buyer at current levels. It's still at the top end of the range for the last year. Wait and be rewarded by patience as with Google. |