Buy the crash! That ids one sure way of making money. The trick is buying the right bit of it: the bottom.
Finding a bottom of a crash is difficult and it is recommended not to try and find the bottom of the first leg down.
I am guilty of that with oil but theory says whatever your technique you can’t time things like bottoms, even roughly. It doesn’t stop any of us trying.
Oil has crashed. While I’ve really been sat awaiting a stock crash, Oil has crashed without any help from me.
As such it is time to go bottom hunting in oil. Kits not a whole market event but it is a major situation effecting a broad range of stocks on a global basis.
Today I heard it said that oil in the current climate is worthless. This is a tremendous buying signal for me.
When the market crashes it’s the headline, “The end of capitalism” that always flags the bottom.
Is ‘oil is worthless’ the same flag? If it isn’t it an amber light that oil is getting very interesting indeed for contrarians that like to buy crashes.
I’ve been buying oil majors like Shell, Exxon and Chevron plus a bit of crazy oil. I’ve bought a lot as a part of a diversified portfolio but not much in the scheme of a ‘going all in’ decision.
I hate the thought of going big into anything. We can all be wrong and lose our shirts that way.
Hesitation is sensible, cheap can always get cheaper. Oil could get to $20 a barrel on a panic. The key thing to worry about is an event like the banking crisis of 2008, where banks that seemed so indestructible were simply wiped out by the event. People bought and overcommitted to bank stocks because they couldn’t believe that banks could fail but then they did.
I do not think Chevron and Exxon or Shell can be wiped out like this, but I will never say ‘never.’
Oil is down 70-80%. Uglier oils have fallen more than Brent and WTI, This kind of percentage drop is where big crashes end.
So this is the place to start buying.
I’m early to the party but when you fish for the bottom of a market that is how it can pan out. After the bottom is in we are likely to get a W chart pattern forming. The V is rare but can happen as we have seen in the stock market of late. The smart thing to do is buy across the bottom and layer in. That is what I’m doing.
I will buy a big chunk every $5 down from $35 on WTI and I will buy Oil majors and if it goes to $25 I will buy some second tier oil companies displaying implausible ‘going out of business’ prices.
Oil is not going out of fashion. The solution to low priced oil, is low priced oil. The world will gorge on cheap oil until it is no longer cheap. That’s how the human locust operates. It is unlikely to take too long. $40 to $45 a barrel is the break-even point for the oil industry and $70 is approximately the level for biofuels. So somewhere between the two levels is a reasonable price for oil.
This crash is still in its early stages at least on the basis of time taken to resume a stable price, but now is the time to focus in on tactic of buying into oil while it is low. It shouldn’t be seen as a short term trade even if there will be plenty of opportunities for that kind of thing. The oil trade is a medium term play.
My strategy is to buy oil majors for the dividends and the upside, then scope out bargains to be snapped up if there is an extra leg down and a final capitulation.
Stay Calm and be ready to buy.